Citi India’s unit is set to significantly increase its purchases of asset-backed securities (ABS) as domestic lenders seek additional liquidity amidst slow deposit growth. The bank aims to triple its ABS holdings, targeting more than $1 billion by the end of the fiscal year. This comes as India’s overall securitisation volume is expected to approach $30 billion for the fiscal year ending March 31, 2026.
The securitisation market in India, though still small, has been expanding as banks and non-bank lenders explore opportunities to improve their credit-deposit ratios. Historically, private banks have had limited participation in this market, but regulatory pressure has prompted them to engage more actively.
Securitisation deals in India generally take two forms: asset-backed securities, also known as pass-through certificates, and direct assignments. Citi India is focusing on the former, anticipating that pass-through certificates will account for nearly 60% of the country’s total securitisation deals this financial year, while direct assignment transactions are expected to decline.
The market has experienced rapid growth, with the overall volume of asset securitisation increasing by over 80% to 680 billion rupees (US$11 billion) in the third quarter compared to the same period last year, according to ICRA Ratings. This growth is driven by the involvement of large private banks, which previously played a minor role in a market traditionally dominated by non-bank financial companies and housing finance firms.
Private lenders such as HDFC Bank and IDFC First Bank have increased their securitisation activities, focusing on retail loans including mortgages and auto loans. Digital lenders like Navi Finserve have also entered the market. Vehicle loans represent the largest asset class in securitisation, while personal loans and loans to small and medium-sized enterprises (SMEs) are becoming more common in these portfolios.
As the securitisation market evolves, local asset management companies and lenders have been the primary buyers of these securities. However, long-term investors such as insurance and pension funds are expected to play a more prominent role in purchasing assets like mortgages. Additionally, alternative investment funds may also become significant buyers in the near future.
The continued growth of the securitisation market is expected to provide additional liquidity for lenders and help them manage their credit-deposit ratios through diverse funding avenues.
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