India securitisation Q1: Gold loans lead issuances, overtaking vehicle loans, CRISIL says

Gold loans became the biggest securitised asset class in the April-June quarter of the current fiscal. Gold loans moved ahead of vehicle loans in India’s securitisation market, a CRISIL Ratings report said on Monday. Overall issuances rose 22 per cent year-on-year to about Rs 60,000 crore in the quarter.

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Securitisation lets lenders bundle loans and sell them to investors. This raises funds and frees capital for new lending. CRISIL said the strong volumes showed NBFCs relied more on securitisation. Demand for credit stayed firm, and investors continued to buy securitised assets.

Gold loan securitisation leads market shift

Gold loans formed about 31 per cent of total securitisation volume in the first quarter. Vehicle loans fell to about 26 per cent of the total. CRISIL linked this to fewer issuances by a large originator. More than 98 per cent of quarterly issuances came from NBFCs.

"Specifically, gold loan financiers saw strong portfolio growth and used the direct assignment DA route to source funds,\" CRISIL Ratings Director Deepanshu Singla said. Singla said public sector banks led investments in these deals. Singla added banks were drawn by low past credit losses. Singla also pointed to risk-weight benefits.

Gold loan securitisation drives direct assignment growth

The asset mix changed how deals were structured. Direct assignment deals made up about 54 per cent of total volume. Pass-through certificate PTC deals accounted for 46 per cent. CRISIL said about 87 per cent of securitised gold loans used the direct assignment route.

Banks invested in about 90 per cent of issuances in the quarter. This included public sector, private and foreign lenders. Other buyers included large NBFCs and alternative investment funds. Mutual funds, insurers, high-net-worth individuals, and family offices also participated.

Gold loan securitisation affects MBS and other segments

The rise in gold loan securitisation reduced the share of retail mortgage-backed securitisation MBS. MBS fell to 12 per cent from 21 per cent a year earlier. CRISIL linked this to subdued activity by a large private bank. That bank had driven large MBS volumes last fiscal.

Business loan securitisation rose to 10 per cent from 7 per cent. CRISIL said secured business loan pools led that growth. Microfinance loans made up 14 per cent of the overall volume. This was up from 11 per cent, helped by better portfolio performance and demand for priority-sector assets.

\"She said the number of unique originators accessing the securitisation market increased to around 115 in the April-June quarter from around 90 in the year-ago period.\" CRISIL Ratings Associate Director Payal Anand said growth should continue in coming quarters. Anand cited strong retail credit growth and wider originator participation.

With inputs from PTI