Fundraising by small finance banks (SFBs) through securitization is expected to cross Rs 10,000 crore in fiscal 2024, up from Rs 6,400 crore in the previous year, rating agency ICRA said on Tuesday.
In the third quarter of FY2024 alone, there were record high quarterly securitization volumes of around Rs 4,200 crore, ICRA said in a press release.
“The market share of SFBs in the securitization market would accordingly peak at 6 percent in FY 2024, compared to levels of less than 2 percent before FY 2022,” the report said.
In FY2024, ICRA said six SFBs raised funds through this route, up from four in FY2023 and only two in FY2022.
“The increase in the number of SFBs securitizing their assets indicates a deepening of the domestic securitization market as it provides them with an alternative route to raise funds to support their growth momentum,” the report said.
Abhishek Dafria, Senior Vice President and Group Head – Structured Finance Ratings at ICRA said the securitization market has traditionally been dominated by non-banking financial companies and housing finance companies acting as originators. Thus, the emergence of SFBs has helped in expanding the market.
“The SFBs are witnessing healthy growth in their gross advances of around 24 to 25 percent, which is likely to continue in the near term given the strong credit appetite in the country,” he said.
While deposits continue to constitute a significant portion of the overall funding mix, SFBs have increased the share of securitization in FY2023 and YTD FY2024 as a means to diversify their funding mix, he added.
“Additionally, given increased competition for deposit mobilization and slowing deposit growth, ICRA expects to continue to increase their securitization volumes in the near term,” Dafria said.
The overall domestic securitization market has witnessed strong growth in recent years and is estimated at around Rs 1.9 – 2 lakh crore for FY 2024, compared to Rs 1.8 lakh crore in FY 2023, supported by high financing requirements for the originators, linked to the rise of both originators and investors in the securitization market, ICRA said.
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First print: March 5, 2024 | 4:36 PM IST