Securitisation volume surged 33% to over ₹1.8-lakh crore in FY23

Securitisation volume has surged 33 per cent to over ₹1.8-lakh crore in FY23, only a tad lower than the previous high of ₹1.9-lakh crore in FY19.

Krishnan Sitaraman, Senior Director and Deputy Chief Ratings Officer, Crisil Ratings, said: “Four dominant factors have underpinned the recent phase of growth in the securitisation space — more originators, new investors, emerging asset classes, and innovative structures. These, along with stable pool performance and regulatory clarity, have made this mechanism a streamlined and reliable tool to raise funds.”

With 160 originators and 110 investors executing 1,000 transactions in FY23, the market turned more extensive and diverse. This compares favourably with 130 originators and 90 investors participating in 700 transactions in FY22. Rising credit growth at non-banks with revival in the economy has seen them ramp-up securitisation volumes, as it is an important fund mobilisation source for them, according to Crisil

Editorial: Boosting securitisation 

While direct assignment (DA) transactions accounted for 58 per cent of the deals last fiscal, pass-through certificate (PTC) issuances comprised the rest. Among asset classes, property-backed loans were the largest segment (38 per cent of volume), while commercial vehicles (29 per cent) also retained a dominant share.

The share of microfinance institutions (MFIs; 15nper cent) in overall securitisation volume doubled to ₹26,000 crore with 300 pools securitised by 40 originators in FY23. The share of unsecured (personal and business) loans grew to 10 per cent from 7 per cent previous fiscal, driven by higher yields and strong track record of rated pools.

A number of new transaction structures emerged in FY23, with turbo-amortisation being prominently stipulated across transactions. The turbo-provisions permit payback of dues to the investor at an accelerated pace in the event of excess collections. About 15 per cent of all PTC transactions were executed incorporating this feature.

The market also saw boilerplate securitisation deals recede in the past few months and other trends come to the fore. For instance, volume of mortgage-backed PTCs rose four-fold on-year to ₹4,000 crore last fiscal, driven by investor preference. The underlying pool of one of these comprised loans acquired by the securitising entity through a DA, sold through a PTC to a fresh investor. This is the first such transaction after the Reserve Bank of India issued master directions in September 2021.

Among investor groups, domestic banks, involving both private sector (49 per cent) and public sector (27 per cent) banks, invested in the highest number of deals as a segment, while foreign banks (11 per cent) expanded their participation. In a departure from past practice, the latter moved beyond the hallowed ‘AAA’-rated PTCs and stepped cautiously into the ‘AA’ and ‘A’-rated categories for CV and MFI loan-backed PTCs.

Another emerging trend was bigger non-bank entities acquiring loans from smaller non-banks. These deals comprised 7 per cent of the market in FY23, and may gain greater traction in the months ahead as larger non-banks benefit from the operational efficiencies in such transactions. However, banks, including foreign-owned ones, remained the largest acquirers of DA pools.

Rohit Inamdar, Senior Director, CRISIL Ratings, said: “The securitisation segment has increasingly opted to alter transaction structures to suit the requirements of investors. Wider adoption of these aspects into structuring could lead to greater participation and diversification of the investor base, thereby positively impacting the overall market.”

What has also supported securitisation volumes are stable collection efficiencies in transactions at an average of 95-99 per cent across asset classes as well as the regulatory guidelines issued over the last two fiscals providing additional clarity on securitisation transactions to originators and investors alike.

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