HDFC merger will shrink mortgage-backed securities

MUMBAI: The merger of HDFC with HDFC Bank is expected to result in a decline in the share of mortgage-backed loans in securitisation. HDFC has been the top originator of mortgage-backed securities, with housing finance companies accounting for approximately a third of the total volumes in the first quarter of FY24.

According to ICRA, the share of mortgage-backed loans is projected to decrease to 20%-25% of the total volumes following the merger of HDFC and HDFC Bank. Vehicle loans are anticipated to become the largest asset class in the securitisation space due to strong activities in construction and mining, leading to increased loan volume growth in the near future.

ICRA estimates that securitisation volumes from non-banking finance companies and housing finance companies in the first quarter of FY24 will reach approximately Rs 53,000 crore, reflecting a growth of around 60% compared to the Rs 33,000 crore securitised in Q1FY23. After experiencing a decline during the pandemic, securitisation volumes have shown signs of recovery. In FY23, securitisation volumes reached approximately Rs 1,80,000 crore.

Abhishek Dafria, senior vice president and group head of structured finance ratings at ICRA, said, "The securitisation market has demonstrated resilience in the first quarter of the current fiscal year. Despite the rise in interest rates, there's strong demand for retail credit , leading to increased financing requirements for non-banking financial companies and housing finance companies. "