ICRA estimates the securitisation volumes, originated largely by non-banking financial companies (NBFC)s and housing finance companies (HFC)s, to have grown by about 70% to Rs. 73,000 crore in H1 FY2023 compared to over Rs. 43,000 crore reported in H1 FY2022. Of this, about Rs. 40,000 crore of assets were securitised in Q2 FY2023 which implies a healthy 21% QoQ growth over volumes seen in Q1 FY2023 and 54% YoY growth over Q2 FY2022. Growth in volumes can be attributed to continuing improvement in the macroeconomic scenario following the reduced risks of the Covid-19 pandemic and the resultant robust credit growth for NBFCs and HFCs.
Says Mr. Abhishek Dafria, Vice President and Group Head - Structured Finance Ratings at ICRA, "The growth in securitisation volumes in the current year is in line with ICRA's earlier estimates and should comfortably cross Rs 1.5 lakh crore for the full year. The year started on a high note with Q1 FY2023 securitisation volumes being almost double the volumes seen in Q1 FY2022. The buoyancy has continued in the second quarter with securitisation volumes in Q2 FY2023 being more than 50% higher than the volumes seen in the corresponding quarter of last year. Favorable macro-economic scenario, growing fund requirements to support higher disbursements and stable collection efficiencies are some of the key reasons for the momentum. High activity in securitisation space reasserts the fact that for many originators, this remains a key funding tool to support their growth plans. Further, the high disbursements seen in the last 2-3 quarters by NBFCs and HFCs would result in higher availability of retail loans to be securitised for the second half of the year which should result in much stronger volumes despite the increase in interest rates seen in recent months."
Securitisation in India 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). For H1 FY2023, split between DA and PTC was 62% and 38% respectively, similar to the proportion seen historically. Overall securitisation volumes remain dominated by mortgage-backed loans accounting for ~46% share, followed by vehicle loan segment accounting for ~28%. Microfinance loans had seen a sharp drop in volumes during the first half of FY2021 and FY2022 on account of Covid; however, for H1 FY2023, microfinance loans formed ~15% share of overall securitisation volumes which is in line with pre-Covid levels.
Adds Mr. Sachin Joglekar, Assistant Vice President and Sector Head, ICRA, "Over the last few years, mortgage-backed securitisation has been dominated by one large HFC. With impending merger of this entity and likely exit from securitisation space, we expect some reduction in overall volumes from FY2024. However, the impact will be negated to a large extent due to entry of new players securitising their assets. Share of mortgage-backed securitisation, however, would reduce and fall behind vehicle loan securitisation. On the other hand, microfinance loans, whose volumes had dipped considerably during the Covid period, are back in demand with investors, especially given the benefits of being priority sector loans. Its share of ~15% of the overall volumes is in line with the share seen in FY2020. This year has also witnessed high traction in consumer loans and personal loans which will positively impact the overall market."