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According to CareEdge Ratings India’s securitisation market remained resilient in FY26, despite a moderation in retail securitisation volumes by approximately 6% in FY26, primarily due to reduced participation from larger originators. It indicates a constructive outlook for the sector as the underlying macroeconomic environment remains supportive, primarily due to strong credit performance, regulatory tailwinds and growing sophistication in transactions. FY26 saw retail securitisation volumes decline 6% to Rs 2.53 lakh crore, while the broader market grew 1% when wholesale loan PTCs were included.

CareEdge Ratings notes that the key structural drivers supporting the market include ongoing regulatory support through Priority Sector Lending (PSL) guidelines, improved scalability for originators, the ability to selectively securitise high-quality assets, and the historically resilient performance of securitised pools. The Residential Mortgage-Backed Security (RMBS) segment, in particular, continues to present significant untapped potential.

It highlights that notably, two transactions marked key milestones during the year: the first listed RMBS issuance in India (approximately Rs. 1,000 crore) via the Electronic Book Provider (EBP) platform, and a large wholesale securitisation of around Rs. 21,000 crore, both rated CARE AAA(SO). It notes that the market continues to be dominated by Timely Interest and Ultimate Principal (TIUP) structures, accounting for nearly 82% of total volumes. Vehicle loan pools retained their leadership in Pass-Through Certificate (PTC) issuances, whereas mortgage-backed pools led direct assignment activity. Additionally, PTC volumes backed by MFI loans witnessed an increase, reflecting evolving investor preferences amid sectoral uncertainties.

Mehul Pandya, MD & Group CEO, CareEdge said, “The performance of retail PTCs has remained broadly stable over the long term, with low levels of credit loss observed since 2010 for the industry. The rating performance remained broadly stable in the retail securitisation market, with over 98% of CARE-rated PTCs rated (or withdrawn) at the original level or higher. At the same time, the broader market witnessed downgrades, largely concentrated in microfinance and unsecured business loan pools. However, till date, no PTC rated by CARE has defaulted.”

CareEdge Ratings notes that despite this, the overall credit profile of transactions remains strong, with over 90% of issuances in FY26 carrying a rating of AA or above. There has also been a noticeable increase in transactions structured with rating differentials exceeding four notches above the originator rating, indicating continued reliance on structural enhancements.

CareEdge Ratings believes that while near-term headwinds remain, the sector is expected to evolve positively, supported by structural strengths and scope for broader market participation. Going forward, it believes that the growth of the overall market will depend on deeper participation from large originators, stronger institutional investor engagement, and the development of a more active secondary market. Declining PSL premiums, stress in unsecured lending, and broader external uncertainties have moderated appetite in some segments, but improved disclosure, standardised reporting, and wider market participation could support the next phase of expansion. External factors, such as geopolitical uncertainties (including developments in the Middle East), also contribute to a cautious operating environment.

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