Total value of loan assets securitised by non-banking financial companies, including housing finance firms, grew by around 43 per cent in the last fiscal year to Rs 1,25,000 crore, driven by quick economic recovery and lower base effect, a report said on Monday. The amount of loans securitised by NBFCs (Non-Banking Financial Companies) and HFCs (Housing Finance Companies) in FY21 stood at Rs 87,300 crore, Icra Ratings said in a report.

The agency expects the securitisation volume to touch the pre-Covid level of Rs 2 lakh crore in fiscal 2023-24.

“The growth (in securitisation volumes) in FY22 was on account of the lower base of FY21 and quick recovery in economic activities following the second pandemic wave in the first quarter and limited disruptions seen during the third wave,” the agency said.

Securitisation refers to the pooling of cash-flow-producing assets such as mortgages, loans, bonds and subsequent issuance of securities in the capital markets backed by these collateral pools.

The securitisation of retail assets too was in line with earlier estimate of Rs 1.1 lakh crore, while additional securitisation of wholesale loans of close to Rs 15,000 crore was observed in the fourth quarter of the last fiscal.

Abhishek Dafria, vice president and group head (structured finance ratings), Icra Ratings, said the last quarter of FY22 commenced with uncertainty arising from the high COVID-19 infection rates in the country.

However, the less severity of the wave led to lower disruption of activities, due to which the securitisation volumes in Q4 continued the upward trajectory, he said.

In Q4, securitisation volumes were around Rs 50,000 crore, which were in line with pre-Covid quarterly volumes, Darfria said.

For FY22, total securitisation through Direct Assignment (DA) transactions (bilateral assignment of pool of retail loans between two entities) accounted for close to 55 per cent of the total annual volumes, lower than about two-thirds seen over the past few years, the report said.

This was partly on account of securitisation of wholesale loans in Q4, which were done through the Pass Through Certificate (PTC) route, it said.

Within the PTC segment, vehicle loans accounted for one-third volumes, whereas DA was dominated by mortgage-backed loans.

Microfinance Institution (MFI) loans, which had lost investor preference post the onset of pandemic, witnessed significant traction in Q4. MFI loans accounted for 11 per cent of the total volume seen in FY22 with more than half of annual volumes being done in Q4 alone.

Dafria expects FY24 securitisation volumes to reach pre-Covid levels of close to Rs 2 lakh crore, without factoring in the potential market size changes once merger of a leading HFC goes through.