Securitisation volumes in India fall by 29% ­ ICRA report 

Nidhi Bothra
bothra_nidhi@hotmail.com

As per a recent ICRA report1, the issuance volumes in the Indian Securitisation Market have
declined by 29% during the financial year 2010-11 and in terms of numbers; transactions were
almost 20% lower than the previous fiscal.

The market continues to be dominated by direct assignment. Though ABS continued to be major
asset class and commercial vehicles being the dominate asset class contributing to about 70% of
the total ABS volumes, RMBS volumes remained low as the lack of secondary market liquidity,
term of issuance acted as deterrents in the growth in volumes. The drop in volumes was largely
attributable to the drying out of single corporate loan securitisation or loan sell-offs (LSOs), that
had formed the largest product class in FY 2009.

Regulatory factors like “priority sector lending” (PSL) targets for banks—and the resultant
acquisition of such loan pools from non-banking finance companies (NBFCs)—continued to be
the key motivator for ABS and RMBS transactions. Microfinance loan securitisation saw a surge
in the second half of FY2011 as MFIs found it difficult to obtain alternate source of funding and
investors (mainly banks) took exposure in these transactions mainly driven by the motive of
fulfilling their PSL targets.

Securitisation market in India has remained confined to few market participants and has been on
salvaged by the regulatory factors like priority sector lending requirements for banks by way of
purchasing the loan pools from NBFCs or providing funding to the microfinance institutions, but
the constant regulatory changes have left a backdrop of uncertainty regarding the future outlook
of the industry.

1
ICRA Rating Feature, April, 2011, http://www.icra.in/Files/Articles/Indian_Securitisation_Mkt.pdf