India's securitisation volume surges 27 pc in 9 months driven by private banks

Mumbai, Jan 8 Securitisation volume surged by around 27 per cent year-on-year to Rs 1.78 lakh crore in the first nine months of the current financial year, supported by large issuances from private sector banks, according to a CRISIL report released on Wednesday.

Among asset classes, vehicle loans (including commercial vehicles and two-wheelers) accounted for 48 per cent of securitisation volume (vs 40 per cent in the corresponding period in the last financial year).

In the third quarter alone, issuances touched Rs 63,000 crore, up 60 per cent year-on-year, with private sector banks contributing to 28 per cent of this.

On the other hand, originations by non-banking financial companies (NBFCs) were up by a modest 5 per cent. Like-to-like growth (adjusted for volume from a large HFC that merged with a bank) for the nine months of this fiscal is in line with the moderation in the assets under management (AUM) growth.

However, during this same period, there were about 15 first-time NBFC issuers, bringing the total number of originators to 152, compared with around 136 in the corresponding period in the last fiscal year.

CRISIL Ratings director Aparna Kirubakaran said: "Private sector banks with high credit-deposit ratios are expected to continue to use the securitisation route as an efficient balance sheet management tool, thereby propelling the securitisation market volume to all-time highs this fiscal. As for NBFCs, while volume growth remains muted, we foresee more new participants entering the market as small and mid-sized entities seek alternative funding sources beyond bank loans."

Stronger volume growth in certain asset classes continues to ensure the market mix is in favour of pass-through certificates (PTC) over direct assignment (DA). For the first nine months of this fiscal, PTC issuances accounted for 57 per cent of securitisation volume and DAs the remaining 43 per cent. PTC issuances surged over 100 per cent on-year and surpassed Rs 1 lakh crore in the first nine months of this fiscal, equalling the tally for the last fiscal, the report states.

After vehicle loans, mortgage-backed loans accounted for about 23 per cent of securitisation volume (vs 20 per cent in the corresponding period last fiscal). Securitisation backed by gold loans has made a comeback following the lifting of regulatory curbs on a large originator, and DA continues to be the preferred route of securitisation for this asset class, according to the report.

The share of microfinance loans in securitisation fell to 11 per cent (vs 15 per cent in the corresponding period last fiscal) as the sector continues to grapple with asset-quality issues. Meanwhile, the share of personal and business loans grew to around 16 per cent (vs 14 per cent) as more players tapped the securitisation market to raise funds.

Although participation from newer investor classes, including mutual funds, insurance companies and alternative investment funds, is increasing, banks remain the dominant investor class accounting for 70 per cent of securitisation volume.

Securitisation remains an attractive fund-raising option for NBFCs amid tighter regulations around lending by banks. Given the sustained participation of private banks in originations, the market is on track to hit record highs this fiscal, the report said.