Fund raising through loan securitisation by SFBs to cross Rs 10,000 crore in FY24: ICRA

Market share of SFBs in the securitisation market would accordingly touch a peak of 6 percent in FY2024 from levels of sub-2 percent prior to FY22.

Total funds raised through loan securitisation by small finance banks (SFB) is expected to exceed Rs 10,000 crore in the financial year 2023-24 (FY24), ratings agency ICRA said on March 5.

Citing the record number of lenders tapping the market to raise funds, ICRA said that the October-December quarter of FY24 witnessed record quarter securitisation volumes of around Rs 4,200 crore.

“ICRA expects the amount of funds raised through securitisation by the small finance banks (SFBs) to exceed Rs 10,000 crore in FY2024, as against Rs 6,400 crore in FY2023, including both pass-through certificate issuances as well as direct assignments,” the agency said in a press release.

It also said that the market share of SFBs in the securitisation market would accordingly touch a peak of six percent in FY2024 from levels of sub-2 percent prior to FY22.

“In FY24, six SFBs raised funds through this route against four in FY23 and only two in FY22. The increase in the number of SFBs securitising their assets signals a deepening of the domestic securitisation market, as it provides them an alternate route to raise funds to sustain their growth momentum,” it said.

The overall domestic securitisation market has seen strong growth in recent years and is estimated to be around Rs 1.9 to 2 lakh crore for FY24 compared to Rs 1.8 lakh crore in FY23, supported by high funding needs for the originators, coupled with the increase in both originators and investors in the securitisation market, ICRA said.

In line with the growing acceptance and familiarity on securitisation, the SFBs are also successfully utilising this channel to ensure that growth in the loan book remains robust even if the deposit growth was to witness any challenges. It added that the SFBs have securitised receivables from vehicle loans, microfinance loans, business loans as well as home loans, with a high share of the assets qualifying under priority sector lending (PSL), thereby finding good demand in the banking sector.