Securitisation volume1 surged ~27% on-year to ~Rs 1.78 lakh crore in the first nine months of this fiscal, supported by large issuances from private sector banks. In the third quarter alone, issuances touched ~Rs 63,000 crore, up ~60% on-year, with private sector banks contributing to 28% of this.
On the other hand, originations by non-banking financial companies (NBFCs)2 was up a modest ~5%. Like-to-like growth (adjusted for volume from a large HFC that merged with a bank) for the nine months this fiscal is in line with the moderation in the assets under management (AUM) growth. However, during this same period, there were ~15 first-time NBFC issuers, bringing the total number of originators to 152, compared with ~136 in the corresponding period last fiscal.
Says Aparna Kirubakaran, Director, CRISIL Ratings, “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% of securitisation volume and DAs the remaining 43% (refer Chart 3 in Annexure). PTC issuances surged over 100% on-year and surpassed Rs 1 lakh crore in the first nine months of this fiscal, equalling the tally for last fiscal.
Among asset classes, vehicle loans (including commercial vehicles and two-wheelers) accounted for 48% (refer chart 2 in Annexure) of securitisation volume (vs 40% in the corresponding period last fiscal).
Mortgage-backed loans accounted for ~23% of securitisation volume (vs ~20% 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.
The share of microfinance loans fell to 11% (vs 15% 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 ~16% (vs ~14%) 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% 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.