Loan securitisation volumes seen 60% up in Q1

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Loan securitization volumes, mainly originated by Non Bank Financial Corporations (NBFCs) and Housing Finance Companies (HFCs), are expected to be 60 per cent higher YoY at Rs 53,000 crore in Q1 FY24, compared to 33,000 crore a year ago, according to ICRA Ratings.

In the first quarter, mortgage-backed loans accounted for a third of total volumes, with the Housing Development Finance Company continuing to be the largest source.

Securitization volumes, which combine both direct designations and pass-through certificates (PTCs), have seen a healthy recovery post-pandemic, recording volumes of INR 1.8 million in FY23 – close to pre-pandemic figures.

The securitization market continued to recover in the first quarter of the current fiscal year. Abhishek Davria, Senior Vice President and Group Head, Structured Finance Ratings, ICRA said, adding that lenders also continue to rely on securitization as a means of fundraising and diversification of fundraising.

The exit of HDFC from the market, following its merger with HDFC Bank from July 1, is likely to affect trading volumes. The share of mortgage-backed loans, which historically accounts for the largest share of securitization volumes at 30-40 percent, is expected to drop to 20-25 percent.

auto loans

The next largest sector, auto loans, is then expected to become the largest asset class in securitization as strong construction and mining activities will drive loan volume growth in the near term.

ICRA expects the total market to grow to ₹1.9-lakh crores in FY24, driven by the increase in volumes from existing originators and the emergence of new ones.