ICRA has revised its securitisation volumes estimate upwards for FY2025 to ₹2.4 lakh crore from the previous estimate of ₹2.1 lakh crore in view of the continued presence of large-size banks in the market.

The credit rating agency noted that, historically, non-banking financial companies (NBFCs) and housing finance companies (HFCs) have securitised standard assets in the domestic market.

However, this year, the entry of a few large private sector banks that have sold part of their loan portfolio through securitisation (i.e. either direct assignment (DA) or via the pass-through certificate (PTC) route) has driven the growth volumes. ICRA estimates the securitisation volumes at ₹1.8 lakh crore for the first nine months (9M) of FY25 against ₹1.4 lakh crore in 9M of FY24.

ICRA estimated the overall volume of securitisation of standard assets for Q3 FY2025 at ₹68,000 crore, largely in line with the volumes witnessed in the previous quarter. The securitisation volumes saw a sharp Year-on-Year jump of 80% (volumes of ₹38,000 crore in Q3 FY2024). In FY243, the securitisation volumes stood at ₹1,91,800 crore.

Abhishek Dafria, Senior Vice President and Group Head, Structured Finance Ratings, ICRA, said: “The continued portfolio sell-down by the private banking sector has elevated the overall securitisation volumes in Q3 FY25. As was seen in the previous quarter, more than one-third of the total securitisation volume has been originated by banks.”

Dafria observed that securitisation enables banks to improve their credit-to-deposit ratio, given that the pace of deposit accretion has been relatively lower than expected in this fiscal year.

“We expect the banks to continue to securitise part of their assets over the near term until the credit-to-deposit ratio reaches acceptable levels. Securitisation further provides an alternate funding means to both banks and the NBFCs and improves the asset-liability position,” he said.

Nonetheless, securitisation volumes in Q3 FY2025 were affected to some extent by the relatively muted growth in disbursements in the NBFC sector, especially for the unsecured asset classes, such as microfinance and personal loans, due to industry headwinds.

Of the overall securitisation volumes, about 55—60 per cent are through PTC issuances, whereas the remaining share is through direct sell-downs or DAs. Investor preference for the mode of securitisation has remained consistent, with public-sector banks preferring the DA route while private-sector banks opting more for PTCs.

ICRA said that vehicle loans still dominate the market among the asset classes that are securitised, given that large banks and NBFCs in this space have been securitising their car loans and commercial vehicle loan portfolios.

The growth momentum displayed by the microfinance loans in the first quarter has reduced in subsequent quarters due to the apparent asset quality stress being seen in the industry, leading to lower disbursements and thus lower funding requirements, it added.

The agency noted that personal loans and unsecured business loans have also been facing asset quality stress in recent quarters, and hence, their volumes have been sliding in Q3 FY2025.

Nonetheless, given the availability of credit enhancements in PTC transactions and the presence of cherry-picked contracts in the securitised loan pools, ICRA does not expect any material impact on the credit quality of the rated PTC transactions.