India's securitisation market began FY27 on a strong note, with volumes rising about 20 per cent year-on-year to around ₹61,000 crore during the April-June period, according to ICRA. Non-banking financial companies (NBFCs) drove the market growth, with NBFCs accounting for nearly the entire market during the quarter, with overall volumes originating from the segment growing 27 per cent over the corresponding period of FY26. As per ICRA, the robust growth came despite some of the larger NBFCs lowering their sell-down volumes, indicating that several new and smaller entities are increasingly using securitisation as a funding and liquidity tool. Sachin Joglekar, Vice President and Co-Group Head, Structured Finance Ratings at ICRA, noted that "the first quarter of 2026-27 has witnessed healthy securitisation volumes, reflecting good demand and continued reliance of originators on securitisation as a liquidity and funding tool."
A notable trend during the quarter was the surge in gold loan securitisation, with gold loans accounting for around 28 per cent of total securitised volumes, making them the largest asset class in the market and the highest share seen since 2020-21, immediately after the onset of the Covid-19 pandemic. The momentum that emerged in the second half of FY26 continued into the first quarter of the current fiscal. According to ICRA, vehicle loans remained the second-largest asset class, accounting for about 25 per cent of securitised volumes during the quarter, while mortgage loans and microfinance each contributed around 13 per cent of the overall market. The changing asset mix also weighed on retail mortgage-backed securitisation (MBS), whose share declined 900 basis points year-on-year to 12 per cent from 21 per cent a year ago, partly due to subdued activity by a large private bank. Payal Anand, Associate Director at Crisil Ratings, explained that "the rise in gold loan securitisation, coupled with subdued activity by a large private bank that had driven sizeable retail mortgage-backed securitisation volumes last fiscal, reduced the share of MBS."
The gold finance segment is currently witnessing a strong growth phase, bolstered by high gold prices, healthy securitisation volumes, and a clear shift away from unsecured lending. Krishnan Sitaraman, Chief Ratings Officer at Crisil Ratings, explained that there is significant investor appetite for the securitised paper of gold finance companies, creating clear tailwinds for companies moving to securitisation. This dynamic creates a "win-win" scenario where originators receive the funding they need, and investors—including banks and mutual funds—secure risk-adjusted returns. Unlike other asset classes, gold loans offer lenders relative comfort due to the high quality and liquidity of the collateral, with non-performing assets (NPAs) being minimal due to the strong performance of these underlying loans. Since gold is a highly liquid asset, lenders can recover their dues through an auction process in the rare event of a default. Historically, the principal outstanding loss is minimal for gold loans, provided lenders now manage operational risks like fraud and collateral purity.
Securitisation of business loans also gained traction with its share rising 300 basis points to 10 per cent of total issuances, led by secured business loan pools, up from 7 per cent in the previous year. Microfinance loans witnessed recovery with improved portfolio performance and demand for priority-sector assets lifting their share by 300 basis points to 14 per cent during the quarter, increasing from 11 per cent in the previous year. According to ICRA, the microfinance sector reported some stability in operations with increasing disbursements and improved collection efficiencies, which in turn has brought back investor interest in this segment. Sachin Joglekar, Vice President and Co-Group Head, Structured Finance Ratings at ICRA, noted that "the microfinance sector also showed signs of operational stability, with improving disbursements and collection efficiencies helping revive investor interest." This diversification across asset classes reflects growing investor preference for collateral-backed assets and priority-sector lending opportunities, with the improved performance of microfinance loans boosting their share of total securitisation volumes. The evolving asset composition reflects the market's shift toward securitisation of assets with stronger credit profiles and risk-weight benefits.
The evolving asset composition influenced the choice of securitisation structure, with direct assignments (DA) accounting for 53 per cent of total securitisation volumes during the quarter, exceeding pass-through certificates (PTCs), which made up the remaining 47 per cent. This marks a reversal from the trend seen over the previous two years. Around 87 per cent of securitised gold loan transactions during the quarter were executed via the direct assignment route, while vehicle and microfinance loans continued to be predominantly sold through PTCs. According to ICRA, gold loans and mortgage loans were largely securitised through the DA route, reflecting the market's preference for mechanisms that offer better risk-weight benefits and lower operational complexity. The changing asset mix also altered the mode of securitisation, with direct assignment transactions becoming increasingly dominant as NBFCs and gold loan financiers favored this route for optimal risk-weight benefits.
The securitisation market saw broad-based investor participation during Q1FY27, with banks, including public sector, private and foreign lenders, investing in around 90 per cent of the issuances during the quarter. Other investors included large NBFCs, alternative investment funds, mutual funds, insurance companies, high-net-worth individuals and family offices. As per ICRA, the strong underlying demand for gold loans is expanding the Assets Under Management (AUM) for gold finance companies, with their loan books growing and requiring additional funding, pushing them toward the securitisation market in the current market scenario. ICRA projects the annual securitisation volumes to be in the range of ₹2.6-2.7 lakh crore in 2026-27, with non-banking entities driving the growth from the level of ₹2.5 lakh crore in 2025-26. The robust volume indicates NBFCs ramped up recourse to securitisation for raising funds amid sustained credit demand and healthy investor appetite for securitised assets. ICRA also noted moderation in the securitisation of MSME and business loans, reflecting investor caution amid headwinds in the segment, indicating selective participation in certain asset classes.
