Gold loans emerged as India's largest securitized asset class in the April-June quarter of the current fiscal, overtaking vehicle loans in the country's securitisation market, according to a Crisil Ratings report released Monday.

Key Highlights

• Gold loans overtook vehicle loans as India's top securitised asset class, capturing a 31% share in Q1.
• Securitisation volumes surged 22% year-on-year to Rs 60,000 crore, with NBFCs originating over 98% of issuances.

Securitization - the process through which lenders pool loans and sell them to investors to raise funds and free up capital for fresh lending - saw issuances jump 22% year-on-year to around Rs 60,000 crore during the quarter. The report noted that more than 98% of issuances were originated by non-banking financial companies (NBFCs), a sharp contrast to previous peak periods when banks also contributed meaningfully.

Gold Loans Claim 31% Share, Vehicle Loans Slip to 26%

Gold loans accounted for around 31% of overall securitization volume in Q1, overtaking vehicle loans, whose share moderated to roughly 26% due to fewer issuances by a large originator. "The robust volume indicates NBFCs ramped up recourse to securitisation for raising funds amid sustained credit demand and healthy investor appetite for securitised assets. Specifically, gold loan financiers saw strong portfolio growth and used the direct assignment (DA) route to source funds," said Deepanshu Singla, Director, Crisil Ratings. He added that public sector banks were the key investors in these transactions, drawn by the historically negligible credit losses in gold loans and the associated risk-weight benefits.

Changing Asset Mix Reshapes the Market

The rise of gold loan securitization, combined with subdued activity by a large private bank that had previously driven sizeable retail mortgage-backed securitization (MBS) volumes, pulled MBS's share down to 12% from 21% a year earlier. Meanwhile, business loan securitization rose to 10% from 7%, led by secured business loan pools, and microfinance loans climbed to 14% from 11%, aided by improved portfolio performance and demand for priority-sector assets.

Also Read: Gold Loans Emerge as India's Second-Largest Retail Credit Segment

Direct Assignment Overtakes PTC Transactions

The shifting asset mix also changed how deals are structured: direct assignment (DA) transactions accounted for around 54% of total volume, compared with 46% for pass-through certificate (PTC) transactions. Notably, 87% of securitized gold loans during the quarter were executed through the direct assignment route. Banks - public sector, private, and foreign - invested in around 90% of issuances, with the remainder coming from large NBFCs, alternative investment funds, mutual funds, insurance companies, high-net-worth individuals, and family offices.

Payal Anand, Associate Director, Crisil Ratings said, "The securitization market is expected to sustain its growth momentum in the coming quarters, supported by healthy retail credit growth and rising participation from originators across asset classes." She noted that the number of unique originators accessing the securitization market rose to around 115 in Q1, up from around 90 a year earlier.