New Delhi, Apr 7 (KNN) Securitisation – sale of loans to investors – by lenders, including banks and non-banking financial companies (NBFCs), crossed Rs 50,000 crore during the fourth quarter ended March 2025 (Q4FY25).
This represents a slight increase from Rs 48,000 crore recorded during the corresponding period of FY24.
On a sequential basis, however, securitisation volumes declined substantially from approximately Rs 69,000 crore each in the second and third quarters of FY25, according to rating agency ICRA. This sequential decline reflected an improvement in liquidity conditions.
Several market participants, particularly private banks that had securitised higher volumes in Q2 and Q3, reduced their activity in the final quarter of the financial year, according to analysts and bankers.
Securitisation involves pooling similar assets, such as mortgages, auto loans, or credit card debt, and then repackaging them into securities like pass through certificates (PTCs). The loans are also sold through direct assignment.
Lenders, especially banks, typically purchase loan pools to meet priority sector lending requirements.
ICRA data revealed that overall securitisation volumes reached approximately Rs 2.35 trillion for the financial year FY25, up from Rs 1.9 trillion in FY24.
Sachin Joglekar, group co-head of structured finance ratings at ICRA, attributed part of the fourth quarter performance to sluggishness in loan disbursements among NBFCs in microfinance and other unsecured asset classes.
Private sector banks continued to sell portions of their credit portfolio through securitisation to lower their credit-to-deposit ratios.
The country’s largest private sector bank, HDFC Bank, was less active in selling loans during the fourth quarter. According to a filing with the BSE, the bank securitised Rs 10,700 crore of loans in Q4 and Rs 57,000 crore in FY25.
Based on securitisation volumes for small and medium NBFCs in FY24, microfinance and micro, small and medium enterprises (MSMEs) account for a significant share of total securitisation.
This pattern indicates that NBFCs with portfolios primarily consisting of unsecured or low-ticket asset classes rely more heavily on securitisation for their funding needs.
In its March 2025 review of securitisation by NBFCs, ICRA projected that securitisation volumes for medium and small sized NBFCs are expected to decline in the current financial year.
This forecast was attributed to de-growth in disbursements amid ongoing headwinds, especially in the unsecured asset class.
The share of smaller NBFCs in overall securitisation remains low due to limited investor appetite, with bankers noting that the perceived servicer risk for these entities is higher compared to larger NBFCs.
(KNN Bureau)
