The total securitisation volumes in FY2023 stood at Rs 1,78,000 crore. (Representative picture)
Securitisation volumes for Q4 have been largely dominated by securitisation of retail loans (90 per cent)
Securitisation volumes, originated largely by non-banking monetary corporations (NBFCs) and housing finance corporations (HFCs), stood at Rs 61,000 crore in Q4 FY2023, the best quarterly volumes seen for the reason that onset of the COVID-19 pandemic, in accordance with a report by scores company Icra. It added that the volumes for the quarter are largely dominated by securitisation of retail loans (90 per cent).
“The total securitisation volumes in FY2023 stood at Rs 1,78,000 crore, i.e. a wholesome 41 per cent enlargement over Rs 1,26,500 crore seen in FY2022,” Icra said in the report.
Securitisation is the practice of pooling together various types of debt instruments and selling them as bonds to investors. It is a risk management tool.
Abhishek Dafria, vice-president and group head (structured finance ratings) at ICRA, said, “The upward trend in the securitisation volumes continued for another quarter as NBFCs and HFCs witnessed an increase in funding requirements to meet the growing credit demand. Overall securitisation volumes for FY2023 remained marginally higher at Rs 1.8 lakh crore than our earlier estimates of Rs 1.7 lakh crore.”
He added that the rising rates of interest over the previous 12 months haven’t but materially dampened the credit score demand. With the Monetary Policy Committee (MPC) protecting the repo fee unchanged within the latest assembly, Icra expects the disbursement tendencies for NBFCs and HFCs to stay wholesome over the close to time period, which can assist the expansion within the securitisation market throughout all asset courses. Nonetheless, the macro-economic situations stay a monitorable as world economies proceed to handle excessive inflationary pressures.
“In FY2023, Mortgage-backed (MBS) loans shaped the largest chunk of the general volumes at 33 per cent, adopted by automobile loans at 28 per cent. Microfinance loans have made an enormous comeback accounting for 20 per cent and 18 per cent of Q4 FY2023 and full-year FY2023 volumes, respectively,” Icra said.
Securitisation is carried out either through direct assignment (DA) transactions (bilateral assignment of pool of retail loans from one entity to another) or through the pass-through certificate (PTC) route (instruments issued by bankruptcy remote trusts). In FY2023, the share of PTC was about 40 per cent in retail securitisation which is largely in line with the historical trends. Securitisation of personal loans has remained strong throughout the year accounting for 3 per cent of the total volumes.
Dafria said, “The share of MFI loan securitisation has significantly improved to 20 per cent of total volumes securitised in Q4 FY2023. The securitisation market in India is gradually becoming more broad-based with asset classes like personal loans, education loans and school finance loans also gaining traction. In particular, securitisation of personal loans remained strong throughout the year accounting for 3 per cent of the total volumes.”
He additionally stated securitisation would stay an necessary funding device for retail-focused NBFCs, because it supplies funding at a gorgeous price, whereas concurrently reaching a effectively matched ALM place. Securitisation is predicted to stay buoyant in FY2024 as effectively, although the general volumes might see a decline of 15-20 per cent as a result of impending merger of a big HFC with a financial institution publish, which it’s unlikely to hold out mortgage sell-downs.
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