Retail asset securitisation saw a jump in FY23, reverting nearly to pre-Covid levels, led by a largely stable environment and positive economic outlook. However, going ahead, growth and the inflation trajectory will remain the main driving forces amid both domestic challenges and global uncertainty.
“The reduction in the volume expected from the culmination of the merger of the HDFC twins and the evolving situation with the growing adoption of the co-lending model will have a major impact on the how the retail securitisation market evolves in the near future,” Sriram Rajagopalan, Associate Director at CARE Ratings, said.
Read also: Securitisation of retail assets by NBFCs, HFCs jump 61% in Q3
Retail assets
The secondary market for standard retail assets – both PTC (pass through certificates) and DA (direct assignment) – revived after two years to see a growth of 56 per cent in FY23, pushing the total market volume over ₹1.76-lakh crore.
This reflects the resilient performance of retail asset pools and the preference of banks to grow retail assets and meet priority sector lending (PSL) requirements, CARE said, adding that DA transactions grew 49 per cent in FY23 and constituted 61 per cent of securitisation volumes.
Of this, the share of mortgage-backed securitisation (MBS) was at 50 per cent. asset-backed securitisation (ABS) transactions comprised 31 per cent, and microfinance (MFI) loan transactions for 19 per cent of DA volumes.
PTC volumes were mainly driven by ABS pools, which accounted for 76 per cent PTC transactions, followed by vehicle loan financing for 62 per cent and MFI loans for 13 per cent. The ratio of DA to PTC transactions remained largely unchanged over the years.
Volume of transactions
On the other hand, the volume of wholesale securitisation transactions was around ₹6,600 crore for FY23. The overall number of originators increased 30 per cent across banks, small finance banks, NBFCs and HFC, the ratings agency said.
The market saw participation from one of the leading PSU banks as investors in PTC transactions, a deviation from their preferred mode of taking exposure through the DA route. It also saw instances of coupons getting linked to floating rate benchmarks despite the underlying loans being fixed-rate, it added.