Securitisation Volumes Skyrocket

In a remarkable turn of events, securitisation volumes have witnessed an 80% year-on-year increase, reaching Rs 68,000 crore in the December quarter, as reported by ICRA. The agency has revised its total volume estimates for the current financial year upwards to Rs 2.4 lakh crore, a significant 25% rise from the previous forecast of Rs 2.1 lakh crore.

Understanding Securitisation

Securitisation is a financial strategy where lenders transfer future receivables, such as loan repayments, to another party in exchange for immediate cash. This process not only helps lenders unlock liquidity but also allows investors to earn returns from these receivables over time.

Private Banks Lead the Charge

The growth in securitisation volumes has been significantly driven by private sector banks, with the October-December quarter volumes matching those of the previous quarter. Abhishek Dafria, head for structured finance ratings at ICRA, emphasized the continued sell-down of portfolios by private banks as a key factor behind this growth.

Addressing the Deposit Dilemma

The banking sector is currently facing a 'war for deposits,' raising concerns over the availability of resources to meet credit demand. In light of this, securitisation has emerged as a crucial tool for banks to improve their credit-to-deposit ratio, especially in a fiscal year where deposit accretion has been slower than anticipated.

NBFC Sector and Asset Quality Concerns

Despite vehicle loans dominating the securitisation volumes, the growth in the third quarter was tempered by subdued disbursements in the NBFC sector, particularly in microfinance and personal loans. Asset quality stress in personal and unsecured business loans has also contributed to a decline in their securitisation volumes, though ICRA assures that this is unlikely to materially affect the credit quality of rated pass-through certificate (PTC) transactions.

Trends in Securitisation

Approximately 60% of the total securitisation volumes were driven by PTC issuances, with the remainder through direct sell-downs. Public sector banks predominantly prefer the direct assignment (DA) route, while private sector banks favor PTCs. Vehicle loans continue to be a dominant asset class in the securitisation market.