India's Securitisation Market May Cross Rs. 2.7 Lakh Crore in FY27 as NBFCs Expand Funding Activity

Introduction

India's securitisation market has entered FY27 with strong momentum, reflecting the growing importance of structured finance in the country's lending ecosystem. According to industry estimates, India's securitisation market could reach Rs. 2.6 lakh crore to Rs. 2.7 lakh crore by the end of FY27 after recording robust activity in the first quarter. For investors tracking developments in the financial sector, maintaining a demat account provides access to a wide range of listed financial companies that may benefit from these trends.

The market's expansion is being driven largely by non-banking financial companies (NBFCs), which continue to use securitisation as an efficient funding and liquidity management tool. Strong demand from institutional investors, particularly for gold loan-backed assets, has also supported issuance volumes during the opening quarter of the financial year.

 

What Is India's Securitisation Market?

India's securitisation market allows financial institutions to bundle multiple loans into investable securities, which are then offered to institutional or other eligible investors in exchange for funding. Instead of waiting for borrowers to repay loans over several years, lenders package these receivables and transfer them to investors, allowing them to unlock capital immediately.

The funds generated through securitisation can then be used to issue fresh loans, improve liquidity, and diversify funding sources. This process benefits lenders by reducing concentration risk while providing investors with exposure to income-generating financial assets. As India's credit market continues to expand, India's securitisation market has become an increasingly important component of the country's financial infrastructure.

 

Strong Start to FY27

The first quarter of FY27 demonstrated healthy growth for India's securitisation market. Industry estimates indicate securitisation volumes of around Rs. 61,000 crore during the April-June quarter, representing nearly 20% year-on-year growth.

This positive beginning has strengthened expectations that annual securitisation volumes could touch Rs. 2.7 lakh crore during FY27, compared with approximately Rs. 2.5 lakh crore recorded in FY26.

The steady rise in issuance volumes indicates sustained investor appetite despite changing market conditions.

 

Why NBFCs Are Driving India's Securitisation Market

NBFCs have emerged as the primary growth engine behind India's securitisation market. Unlike banks, many NBFCs depend heavily on diversified funding channels to support loan disbursements. By securitising existing loan portfolios, these institutions can free up capital, strengthen liquidity, and continue expanding credit without relying solely on traditional borrowing.

Interestingly, market participation has broadened during FY27. While some large NBFCs have reduced their sell-down activity, several smaller and mid-sized lenders have increased their use of securitisation. This trend suggests that the market is becoming more diversified rather than being concentrated among a handful of large issuers.

For investors following the financial sector, demat account opening enables access to listed NBFCs and other financial companies participating in India's evolving capital markets.

 

Gold Loans Lead Securitisation Activity

One of the biggest developments in India's securitisation market during Q1 FY27 has been the growing dominance of gold loans.

Supported by rising credit demand and expanding loan portfolios, gold loan-backed securitisations accounted for the largest share of market activity during the quarter. Vehicle loans continued to remain another major contributor, while mortgage and microfinance loans also maintained meaningful participation.

Gold loans continue to attract institutional investors because they are backed by physical collateral and have historically demonstrated relatively low credit losses. Their comparatively favourable risk characteristics have made them one of the preferred asset classes within India's securitisation market.

Meanwhile, securitisation of MSME and business loans moderated during the quarter as investors remained relatively cautious amid challenges affecting those segments.

 

How Transactions Are Structured

Transactions in India's securitisation market are generally executed through two primary structures:

• Direct Assignment (DA): Loan pools are transferred directly to the purchasing institution.

• Pass-Through Certificates (PTCs): Investors purchase certificates backed by underlying loan receivables.

During Q1 FY27, direct assignments accounted for slightly more than half of total issuance volumes, while pass-through certificates represented the remaining share.

Gold loan and mortgage portfolios were primarily executed through the direct assignment route, whereas vehicle finance and microfinance portfolios continued to make greater use of pass-through certificate structures.

The choice of transaction structure depends on factors such as the underlying asset, investor preference, regulatory considerations, and funding objectives.

 

What Does This Mean for Investors?

The continued expansion of India's securitisation market reflects improving depth in the country's financial system. A larger securitisation market allows lenders to recycle capital more efficiently, which can ultimately support greater credit availability across retail, housing, vehicle finance, and other lending segments.

Investors should also recognise that different asset classes carry varying levels of risk. Gold loan-backed pools generally benefit from collateral support, whereas MSME and unsecured retail loan portfolios may be more sensitive to economic cycles and borrower repayment behaviour. Another encouraging development has been the broader participation of originators, indicating that securitisation is becoming an increasingly accepted funding mechanism across India's lending ecosystem.

 

Outlook for FY27

The outlook for India's securitisation market remains constructive. Continued funding requirements among NBFCs, healthy institutional demand, and diversified issuance across asset classes are expected to support market growth throughout the year.

However, several factors will remain important to monitor:

• Asset quality across loan portfolios.

• Collection efficiency, particularly in microfinance.

• Investor appetite for different asset classes.

• Regulatory developments affecting structured finance.

• Interest rate movements and overall credit conditions.

If these conditions remain supportive, India's securitisation market is well positioned to achieve the projected Rs. 2.7 lakh crore milestone during FY27.

 

Conclusion

India's securitisation market continues to strengthen as NBFCs increasingly rely on structured finance to support lending growth and manage liquidity. Robust first-quarter issuance, rising participation from smaller lenders, and strong demand for gold loan-backed assets highlight the market's growing maturity.

For investors, these developments signal continued evolution in India's financial sector and underscore the importance of monitoring trends across lending, structured finance, and capital markets. Whether investing in financial sector companies or exploring broader market opportunities, having an online trading account can help investors participate in India's expanding investment ecosystem while building a diversified portfolio.

 

Frequently Asked Questions

What is India's securitisation market?

India's securitisation market allows lenders to bundle loans and transfer them to investors, enabling lenders to raise funds and improve liquidity.

Why are NBFCs driving India's securitisation market?

NBFCs use securitisation to diversify funding sources, release capital from existing loan portfolios, and support fresh lending.

Which asset class dominated securitisation in Q1 FY27?

Gold loans emerged as the leading asset class during the quarter, followed by vehicle loans, mortgage loans, and microfinance loans.

What is the projected size of India's securitisation market in FY27?

Industry estimates project India's securitisation market to reach approximately Rs. 2.6 lakh crore to Rs. 2.7 lakh crore during FY27.

Why is securitisation important for the financial system?

Securitisation improves liquidity, enhances capital efficiency, supports credit growth, and provides institutional investors with access to diversified financial assets.

Disclaimer:  This blog is dedicated exclusively for educational purposes. Please note that the securities and investments mentioned here are provided for informative purposes only and should not be construed as recommendations. Kindly ensure thorough research prior to making any investment decisions. Participation in the securities market carries inherent risks, and it's important to carefully review all associated documents before committing to investments. Please be aware that the attainment of investment objectives is not guaranteed. It's important to note that the past performance of securities and instruments does not reliably predict future performance.