Citi India nears $1 billion book of asset backed securities

India’s relatively small securitization market has been heating up, led by a surge in originations by non-bank lenders and growing appetite for bundled debt from banks and mutual funds

Citigroup Inc.’s India unit has more than doubled its asset-backed securities book to nearly $1 billion in the last two years, ahead of schedule for a goal it set for itself in February.

The bank will buy pools of loans primarily in the form of asset-backed securities, known locally as pass through certificates. One of the dominant buyers of securitized debt in India, Citi has sought to grow its book in an effort to boost liquidity and entice more investors to the market.

“This is an all-time high for Citi India and is expected to grow further in 2026” said K Balasubramanian, chief executive officer and banking head for the country, speaking in an interview.

India’s relatively small securitization market has been heating up, led by a surge in originations by non-bank lenders and growing appetite for bundled debt from banks and mutual funds. Such deals, according to the CEO, are happening across sectors such as consumer loans, mortgages, and on credit given to small and medium enterprises.

Rating company ICRA Ltd. estimates overall volumes grew by around 10% year-on-year to 1.25 trillion rupees ($14.1 billion) in the first half of fiscal 2026.

While securitization deals are common in developed economies, India’s market is still nascent. Balasubramanian expects the market to initially develop at the higher end of the credit spectrum but will gradually move lower. Citi will prefer deals with companies seeking a range of products through a relationship bank, he said.

However, there are challenges to securitization deals, which are considered off-balance sheet funding. Investors mostly prefer asset-backed securities at fixed interest rates and quick changes in interest rates could pull their market value down. Rising interest cycle makes existing securities less attractive.

Moreover, if borrowers of consumer loans start defaulting, the credit quality of loan portfolios could suffer.

Billionaire Mukesh Ambani’s Reliance Group companies raised $2.4 billion through asset-backed securities in September. A year ago, HDFC Bank Ltd sought to offload about $1 billion of loans through pass through certificates. And in April, the Reserve Bank of India introduced regulatory tweaks to enable the securitization of soured debt.