Securitization of retail loans increases

Retail loan securitisations jumped a robust 56% to Rs 1.76 lakh crore in the just concluded fiscal 2023, while that of wholesale rose to around Rs 6,600 crore, coming out of the pandemic blues finally, says a report. The secondary market for standard retail assets has seen a robust growth of 56 per cent in FY23, reflecting the resilient retail asset pools in the secondary market as well as the preference of banks to grow their retail assets to meet priority sector lending requirements, according to a Care Ratings analysis.

Such robust growth was possible as bank lending to NBFCs grew 32 per cent and there is a positive correlation between interest rate and relative premium for PSL assets. Both these factors augur well for securitisation market, the agency said.

“We expect the market to continue to grow but at a moderate pace in FY24,” senior directors Sanjay Agarwal and Vineet Jain said in a note.

The two main drivers of growth for the securitisation market continue to be the priority sector lending requirement and the need to expand the retail asset book.