Mumbai, Jan 6 (PTI) Domestic rating agency Icra on Monday said securitization volumes jumped 80 per cent on-year to Rs 68,000 crore in the December quarter, and has also upped its estimates on total volumes for this financial year.

The financial system is estimated to witness securitization deals, where a lender passes on future receivables to another stakeholder against upfront cash, of around Rs 2.4 lakh crore, up from the previously estimated Rs 2.1 lakh crore.

Also Read | AP SBTET Diploma Results For 2024-25 Released, Know Steps To Check Scorecard at sbtet.ap.gov.in.

The new estimate represents a 25 per cent increase over the Rs 1.92 lakh crore in FY24, it said.

The October-December volumes were similar to the ones observed in July-September (Q2), and participation of private sector banks is helping the volumes, the agency said, adding that typically it is the non-bank lenders who raise resources through this route.

Also Read | What Is Whaling Attack? How To Prevent It? All About Phishing Scam That Targets High-Ranking Employees.

"The continued portfolio sell-down by the private banking sector has elevated the overall securitisation volumes in Q3FY25," its group head for structured finance ratings, Abhishek Dafria said.

He added that over a third of the total securitisation volume has been originated by banks in Q3, which was the same as seen in Q2.

It can be noted that a 'war for deposits' has ensued in the banking system which even led to concerns surrounding the system's ability to find sufficient resources to cater to credit demand, while the merger impact has led HDFC Bank to adopt the securitization route.

"Securitisation enables the banks to improve on their credit-to-deposit ratio, given that the pace of deposit accretion has been relatively lower than expected in this fiscal. We expect the banks to continue to securitise part of their assets over the near-term until the credit-to-deposit ratio reaches acceptable levels," Dafria said.

The Q3 volumes were affected to some extent by the relatively muted growth in disbursements in the NBFC sector, especially for the unsecured asset classes such as microfinance and personal loans, due to industry headwinds, he said.

Personal loan and unsecured business loans are also facing asset quality stress in the recent quarters and hence, its volumes have been sliding in Q3FY25, the agency said, adding that it does not expect any material impact on the credit quality of the rated PTC (pass through certificate) transactions.

Of the overall securitisation volumes, up to 60 per cent volumes are through the PTC issuances, whereas the remaining share is through direct sell-downs.

The investor preference for the mode of securitisation has remained consistent with public sector banks preferring the direct assignment (DA) route while private sector banks opting more for the PTCs, it said, adding that, among the asset classes that are securitised, vehicle loans still dominate the market, given that large banks and NBFCs in this space have been securitising their car loans and commercial vehicle loans portfolio.

The growth momentum displayed by the microfinance loans in the first quarter has reduced in subsequent quarters due to the apparent asset quality stress being seen in the industry, leading to lower disbursements and thus lower funding requirements, it said.

(This is an unedited and auto-generated story from Syndicated News feed, LatestLY Staff may not have modified or edited the content body)