ICRA ratings expects Securitisation of funds through SFBs to cross over Rs 10,000 crore

The rating agency ICRA expects that the amount of funds raised through securitization by the small finance banks (SFBs) will probably exceed Rs 10,000 crore in FY2024, as against Rs. 6,400 crore in FY2023, as of the current scenario.

Q3 FY2024 alone witnessed the quarterly record high securitization volumes of Rs 4,200 crore. The market share of SFBs in the securitization market would expectedly touch 6% in FY2024 from levels of sub-2% before FY2022. In FY2024, six SFBs raised funds through this route against four in FY2023 and only two in FY2022.

The increase in the number of SFBs securitizing their assets signals a deepening of the domestic securitization market, as it provides them an alternate route to raise funds to sustain their growth momentum.

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 The SFBs are witnessing healthy growth in their gross advances at 24-25%, which is likely to continue in the near term. While deposits continue to be a significant share of the overall funding mix, the SFBs have increased the share of securitization in FY2023 and YTD FY2024 as a means to diversify their funding. The overall domestic securitization market has seen strong growth in recent years and is estimated to be around Rs 1.9 - 2.0 lakh crore for FY2024 compared to Rs 1.8 lakh crore in FY2023, supported by high funding needs for the originators, coupled with the increase in both originators and investors in the securitization market. The SFBs have securitized 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.

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About ICRA Limited: ICRA Limited was set up in 1991 by leading financial/investment institutions, commercial banks, and financial services companies as an independent and professional investment Information and Credit Rating Agency. Today, ICRA and its subsidiaries together form the ICRA Group of Companies (Group ICRA). ICRA is a Public Limited Company, with its shares listed on the BSE and the National Stock Exchange. The International Credit Rating Agency Moody’s Investors Service is ICRA’s largest shareholder.

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