Summary of this article
Gold loans become the largest securitised asset class in Q1.
Securitisation issuances rise 22 per cent to around Rs 60,000 crore.
NBFCs dominate issuances as banks remain the biggest investors.
Gold loans have emerged as the largest securitised asset class in the April-June quarter of the current fiscal, overtaking vehicle loans for the first time in the country's securitisation market, stated a latest report by CRISIL Ratings.
Overall securitisation issuances have risen 22 per cent year-on-year to around Rs 60,000 crore during the quarter, reflecting increased fundraising by lenders. Securitisation is a process through which lenders pool loans and sell them to investors to raise funds and free up capital for fresh lending.
The report has noted that non-banking financial companies (NBFCs) have accounted for more than 98 per cent of total securitisation issuances during the quarter. This is a departure from earlier peak periods when banks had also played a significant role in originating such transactions.
Gold Loans Take The Lead
Gold loans have accounted for around 31 per cent of the total securitisation volume during the April-June quarter, making them the largest asset class in the market. Vehicle loans have accounted for around 26 per cent of the total volume, with their share declining because of fewer issuances by a large originator.
The report has attributed the rise in gold loan securitisation to strong portfolio growth among gold loan financiers, who have increasingly used the direct assignment route to raise funds. Under this method, lenders sell loan pools directly to investors instead of issuing market-traded securities.
Public sector banks have emerged as the main investors in these transactions. According to the report, the negligible historical credit losses associated with gold loans and the favourable regulatory capital treatment have supported investor interest.
Asset Mix And Transaction Pattern Change
The growing share of gold loans has also altered the composition of the securitisation market. Retail mortgage-backed securitisation (MBS) has accounted for 12 per cent of total issuances during the quarter, down from 21 per cent a year earlier. The decline has been linked to lower activity by a large private sector bank that had contributed significantly to mortgage-backed issuances in the previous fiscal.
Business loan securitisation has increased its share to 10 per cent from 7 per cent, driven mainly by secured business loan pools. Microfinance loans have accounted for 14 per cent of total securitisation volume, compared with 11 per cent in the corresponding period last year, supported by improved portfolio performance and demand for priority sector assets.
The changing asset mix has also shifted the preferred transaction structure. Direct assignment transactions have accounted for around 54 per cent of the total securitisation volume, compared with 46 per cent for pass-through certificate (PTC) transactions. Around 87 per cent of securitised gold loans have been executed through the direct assignment route.
Banks, including public sector, private and foreign lenders, have invested in around 90 per cent of total issuances during the quarter. Other investors have included large NBFCs, alternative investment funds, mutual funds, insurance companies, high-net-worth individuals and family offices.
The report has also highlighted broader participation from lenders, with around 115 unique originators accessing the securitisation market during the April-June quarter, compared with around 90 in the year-ago period. CRISIL Ratings has said the market is expected to maintain its growth momentum over the coming quarters, supported by healthy retail credit growth and increasing participation from lenders across asset classes.
