Gold did more than shine in India's financial markets this quarter, it pulled off a genuine shake-up. In the April to June quarter of the current fiscal, loans backed by gold became the single largest asset class to be securitised, pushing past the vehicle loans that had long dominated the space. According to a CRISIL Ratings report released on Monday, total securitisation issuances climbed 22 per cent from a year earlier to roughly Rs 60,000 crore in the quarter.
What securitisation actually means
At its core, securitisation is a way for lenders to turn loans into ready cash. A lender bundles together a pool of loans it has already handed out and sells that pool to investors. The money raised flows straight back to the lender, freeing up capital that can then be deployed for fresh lending. CRISIL noted that the robust volumes this quarter were a clear sign that non-banking financial companies, or NBFCs, are leaning on this tool more heavily than before. Appetite for credit stayed firm, and investors kept lining up to buy these packaged assets.
Gold overtakes vehicles
The headline shift lies in the mix of assets. Gold loans made up about 31 per cent of the total securitisation volume in the first quarter, enough to claim the top spot outright. Vehicle loans, by contrast, slipped to around 26 per cent. CRISIL tied that dip to a large originator issuing fewer deals during the period. Tellingly, more than 98 per cent of the quarter's issuances came from NBFCs rather than banks, underlining just how central these financiers have become to the market.
"Specifically, gold loan financiers saw strong portfolio growth and used the direct assignment DA route to source funds," said CRISIL Ratings Director Deepanshu Singla. He explained that public sector banks led the way in investing in these deals, drawn in part by the low credit losses such portfolios have posted in the past. Singla also pointed to the risk-weight benefits that make these assets attractive on a bank's books.
How the deals were built
The changing asset mix reshaped the structure of the deals themselves. Direct assignment transactions accounted for about 54 per cent of the total volume, while pass-through certificate, or PTC, deals made up the remaining 46 per cent. The tilt toward gold was even sharper within that category, with roughly 87 per cent of securitised gold loans going through the direct assignment route.
Banks were the dominant buyers, investing in about 90 per cent of the quarter's issuances. That group spanned public sector, private and foreign lenders alike. Beyond banks, the buyer list included large NBFCs and alternative investment funds, along with mutual funds, insurers, high-net-worth individuals and family offices, a sign of how broad the investor base has grown.
Other asset classes shift too
As gold loans surged, the share of retail mortgage-backed securitisation, or MBS, shrank. MBS fell to 12 per cent from 21 per cent a year earlier. CRISIL attributed the drop to subdued activity from a large private bank that had powered big MBS volumes in the previous fiscal year.
Business loan securitisation moved the other way, rising to 10 per cent from 7 per cent, with secured business loan pools driving that growth. Microfinance loans accounted for 14 per cent of the overall volume, up from 11 per cent. That gain was helped by better portfolio performance and steady demand for priority-sector assets.
A wider field of players
The market is also pulling in more participants. The number of unique originators tapping the securitisation market rose to around 115 in the April to June quarter, up from roughly 90 in the same period a year ago. CRISIL Ratings Associate Director Payal Anand said the momentum is likely to carry into the coming quarters, pointing to strong retail credit growth and the widening pool of originators as the main drivers.
