India’s retail asset-backed securities (ABS) market demonstrated promising growth in the April–June quarter of FY26, indicating increasing investor confidence and a gradually maturing securitisation ecosystem. The Q1FY26 volumes stood at ₹52,000 crore (approximately US$ 6.04 billion), reflecting a 6% year-on-year growth compared to the same period last fiscal year.

This momentum, while modest, represents sustained interest in structured financial instruments despite a volatile macroeconomic backdrop. The uptick was largely driven by securitisation of vehicle loans and microfinance-rated loan pools, both of which continued to remain the preferred asset classes for structured financing.

According to market insights shared by CareEdge Ratings, the composition of retail securitisation volumes in Q1 FY26 reveals a strategic shift toward standardised instruments, especially pass-through certificates (PTCs). These instruments, offering enhanced transparency and predictable risk profiles, have become increasingly attractive to a broad investor base.

One of the most notable developments in the quarter was India’s first-ever residential mortgage-backed securitisation (RMBS). This landmark transaction was conducted by the RMBs Development Company and marks a significant diversification milestone for the Indian structured finance space. Traditionally, India’s securitisation market has been skewed toward short- to medium-term instruments backed by consumer or vehicle loans. The entry of RMBS products now paves the way for the inclusion of long-term mortgage-backed securities, which are standard in developed economies.

RMBS instruments typically enable originators such as housing finance companies (HFCs) to monetise their mortgage assets, thereby freeing up capital for additional lending and improving liquidity across the sector. For investors, RMBS products offer longer-tenor securities with stable cash flows, making them ideal for long-term investment portfolios.

Additionally, vehicle loan-backed securitisations remained the largest contributor to total volumes in Q1, echoing the robust recovery in the automotive sector and steady repayment patterns from borrowers. This was followed by microfinance loan pools, where investor appetite showed resilience, bolstered by improved collection efficiencies and better credit discipline post-COVID.

Microfinance institutions (MFIs) are increasingly tapping securitisation as an alternative funding route, especially as traditional bank lending becomes more selective. The ability to raise funds via rated pools not only provides capital but also improves credit visibility and diversification for MFIs.

The growth of India’s securitisation market also points to a structural shift in the way non-banking financial companies (NBFCs) and HFCs raise funds. With regulatory pressures pushing for stronger capital adequacy, originators are increasingly leveraging structured finance products to enhance liquidity, transfer risk, and access diverse pools of capital.

In terms of regulatory outlook, industry experts expect the Reserve Bank of India (RBI) to continue supporting market development through policies that enhance transparency and reduce investor risk perception. Guidelines on due diligence, reporting standards, and risk retention have already strengthened the market and are expected to evolve further with growing participation.

Looking ahead to the remainder of FY26, analysts project that retail securitisation volumes could grow in the range of 12-15%, provided macroeconomic conditions remain stable and interest rates do not witness sharp hikes. Key trends to watch include:

1. Increasing participation by mutual funds and insurance companies, particularly in RMBS and longer-duration PTCs.

2. Emergence of new asset classes like education loans, personal loans, and even small-ticket gold loans being packaged for securitisation.

3. Digitisation and standardisation of loan origination processes, which enhance the eligibility and transparency of securitised assets.

4. ESG-themed securitisations, especially in the affordable housing and electric vehicle segments, may also gain traction as investor mandates evolve.

Despite its smaller size compared to global markets, India’s securitisation landscape is showing clear signs of structural strengthening. A mix of investor education, regulatory support, and innovative financial engineering is expected to sustain momentum. The diversification of asset classes, improved risk assessment frameworks, and widening investor base are critical enablers of this trend.

The first quarter performance and the debut of RMBS indicate a gradual but steady maturation of India’s retail asset securitisation sector. As the financial ecosystem continues to grow and integrate with global best practices, securitisation is expected to play an even more prominent role in ensuring credit flow to underserved sectors, improving liquidity for originators, and offering new avenues for risk-adjusted investment returns.

In conclusion, India’s retail asset securitisation market is no longer niche—it is a growing segment of the country’s structured finance ecosystem, with considerable headroom for growth. The success of RMBS and the steady traction in vehicle and microfinance loan securitisations suggest that FY26 could mark a transformative year for the segment.

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