Gold loans have taken the top spot in India's securitisation market for the April-June quarter (Q1) of the current financial year. According to a recent report by CRISIL Ratings, gold loans accounted for 31% of the total volume. Securitisation is a process where lenders like NBFCs pool together multiple loans and sell them to investors to raise fresh funds and free up capital for new lending. This news is important for bank officers because it shows a clear shift in where big money is moving within the financial sector.

The overall securitisation market saw a huge surge, growing 22% compared to last year to reach a total of around Rs 60,000 crore in just three months. Interestingly, Non-Banking Financial Companies (NBFCs) originated over 98% of these loans. In previous years, banks also played a large role in creating these pools, but this quarter was almost entirely dominated by NBFCs looking to raise funds for their gold loan portfolios.

For a long time, vehicle loans were the king of this market. However, their share dropped to 26% this quarter because one large originator (a company that gives out loans) did fewer deals. Meanwhile, gold loans rose to the top because NBFCs saw massive growth in their gold portfolios. They used a method called 'Direct Assignment' (selling the loan book directly to another bank) to source these funds. About 87% of all securitised gold loans were handled through this direct route rather than using Pass-Through Certificates (securities backed by the loan pool).

Public Sector Banks (PSBs) emerged as the main buyers or investors in these gold loan pools. For bank aspirants and current officers, it is vital to understand why: gold loans have very low historical credit losses (losses due to non-payment). Additionally, these assets offer 'risk-weight benefits,' which means banks need to keep less capital aside against these loans compared to riskier assets, making them very attractive for a bank's balance sheet.

Other sectors also saw changes during this period. Mortgage-Backed Securitisation (loans involving house property) saw its share fall from 21% last year to just 12%. This happened because a major private bank, which usually does a lot of these deals, remained quiet this quarter. On the other hand, business loans rose to 10% and microfinance loans reached 14%. Microfinance is especially popular because it helps banks meet their Priority Sector Lending (PSL) targets required by the RBI.

The market is not just growing in value but also in variety. The number of unique originators (different companies selling their loan pools) jumped to 115, up from 90 in the same period last year. Apart from banks, other investors like Mutual Funds, Insurance companies, and High-Net-Worth Individuals are also buying these loan pools, showing that there is plenty of trust in the system.

Looking ahead, experts at CRISIL believe this momentum will continue throughout the year. As retail credit continues to grow across India, more NBFCs will likely use securitisation to manage their liquidity. For bank employees, this means you will likely see more gold loan portfolios coming onto your bank's books through these bulk deals, requiring careful monitoring of gold price fluctuations and collateral quality.