India's securitisation market shows structural strength in FY26
New Delhi, May 29
India's securitisation market remained resilient in FY26 despite a modest slowdown in retail transactions, a report said on Friday, pointing to strong credit performance and regulatory tailwinds.
The report from CareEdge Ratings said retail securitisation volumes moderated by approximately 6 per cent in FY26 to Rs 2.53 lakh crore, but maintained a constructive outlook on the sector as the underlying macroeconomic environment remains supportive.
The report noted key structural drivers as ongoing regulatory support through Priority Sector Lending (PSL) guidelines, improved scalability for originators, the ability to selectively securitise high-quality assets, and the historically resilient performance of securitised pools.
The Residential Mortgage-Backed Security (RMBS) segment, in particular, continues to present significant untapped potential.
The broader market grew 1 per cent when wholesale loan pass‑through certificates (PTCs) were included.
It noted that the market continues to be dominated by Timely Interest and Ultimate Principal (TIUP) structures, accounting for nearly 82 per cent of total volumes. Vehicle loan pools retained their leadership in Pass-Through Certificate (PTC) issuances, whereas mortgage-backed pools led direct assignment activity.
Further, PTC volumes backed by MFI loans witnessed an increase, reflecting evolving investor preferences amid sectoral uncertainties.
"The performance of retail PTCs has remained broadly stable over the long term, with low levels of credit loss observed since 2010," said Mehul Pandya, MD and Group CEO, CareEdge.
Meanwhile, the broader market witnessed downgrades, largely concentrated in microfinance and unsecured business loan pools, Pandya noted.
While near-term headwinds remain, the sector is expected to evolve positively, supported by structural strengths and scope for broader market participation, the ratings agency said.
The report added that the growth of the overall market will depend on deeper participation from large originators, stronger institutional investor engagement, and the development of a more active secondary market.
Declining PSL premiums, stress in unsecured lending, and broader external uncertainties have moderated appetite in some segments, but improved disclosure, standardised reporting, and wider market participation could support the next phase of expansion.
— IANS
Reader Comments
As someone working in a small NBFC, I can tell you securitisation is a lifeline for us. The PSL guidelines have helped us lend more to farmers and small businesses. But the declining premiums are hurting - we need more institutional buyers to step in and make the secondary market active. Good report though!
Stable performance since 2010 is impressive - shows our securitisation framework has matured well. But the 6% dip in retail volumes is a yellow flag, especially with the stress in unsecured loans. Hope the RMBS potential finally gets unlocked with better housing data and standardisation. Arre, we need more depth in this market!
Good analysis from CareEdge. But I'm sceptical about the 'untapped potential' line for RMBS - we've been hearing that for years. The real issue is the lack of standardised foreclosure laws and property registration data across states. Until that improves, RMBS growth will stay modest. Still, 2.53 lakh crore is no small number! 💪
As a risk analyst in a bank, I'm watching the MFI-related PTCs closely. The increase in volume despite sector uncertainties is interesting - investors are clearly looking for yield in a low-rate environment. But the downgrade concentration in microfinance and unsecured pools is worrying. Let's hope the structural strengths the report mentions hold up! 🤞
Sab theek hai but aam aadmi ko kya faida? 🤔 Ye sab complex financial instruments hai - as
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