Loan securitisation volumes of non-banking finance companies (NBFC) and housing finance companies (HFC) are likely to rise by 20-25% in the current financial year on the back of an uptick in credit growth due to improved economic activities and funding needs for these entities.

“Addition of new originators and investors in this segment should further support in growth in the securitisation market. Volumes for Q1FY23 are estimated to be about Rs 30,000 crore,” said Abhishek Dafria, vice-president and group head for structured finance, ICRA.

Rating agency ICRA also expect the securitisation market to be largely dominated by the retail asset class which would account for 95% of the market in the current financial year.

The growth of securitisation volumes in the previous financial year was more than 40% due to the lower base of FY21 and quick recovery in the economic activities following the second wave and limited disruptions seen during the third wave. In FY22, securitisation volumes of assets have grown to Rs 1.25 trillion.

The last quarter of the previous financial year has seen a sharp growth and therefore originators have used securitisation as a means to fund higher disbursement targets and investors also drew comfort from stable collection efficiency.

Similarly, analysts expect collection efficiency to improve going forward due to the recovery in economic activities and the addition of new originators. Investors in this segment will support securitisation volumes to grow further.

The securitisation market was severely hit by the pandemic due to restrictions, but it has normalised in FY22. During the period it has picked up sequentially in each quarter despite multiple waves. “The increasing number of originators and investors indicate an overall broadening of the market,” said Sachin Joglekar, Assistant Vice President and Sector Head, ICRA.