SFBs (SFBs) have discovered that the securitization option is a good source of funding and volumes are on the rise and expected to exceed Rs 10,000 crore in the financial year 2024. As compared to the year-ago period, this is a considerable jump. FY2023 got the benefit of 6,400 crores through securitization, SFBs having increased acceptance of securitization as a funding source. SFBs are used to the fact that the traditional method of collecting deposits is the primary source of their funds. Still, the increasing competition for deposit collection is pushing them to search for other funds.
As the securitization for SFBs in FY2023 and the first three-quarters of FY2024 shows an increasing trend in their asset under management (AUM), it is because of the robust growth. In Q3 FY2024, the portion of SFB-originated loans in the total market volumes exceeded 10% of total numbers. With the high credit growth and the fact that deposits at disruptive banks tend to be more costly than traditional banks, expect securitization to remain a key funding source for SFBs.
Although auto loans have been the major type of loan being securitized, other kinds of loan assets such as real estate and MSME loans are also showing high momentum. Hence, the wide scope is an advantage to the overall market securitization. However, macroeconomic fluctuations have not hindered the yield for Pass-Through Certificates (PTCs), which is currently on the increase, implying significant investor confidence in this asset class. Overall, the growing use of securitization by SFBs is signaling its significance as an important funding channel in the financial scene.
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