Gold loans have overtaken vehicle loans to become the largest securitised asset class in India during the first quarter of fiscal year 2027, according to a report by CRISIL. The development marks a significant shift in the securitisation landscape, driven largely by non-banking financial companies (NBFCs).
NBFCs Dominate Issuances
The report highlighted that more than 98 per cent of the securitisation issuances during the quarter were originated by NBFCs. This contrasts with previous peak periods when banks also played a substantial role in the market. The dominance of NBFCs underscores their growing reliance on securitisation as a funding tool.
Gold Loans Surge Ahead
Gold loans have traditionally been a popular secured lending product in India, but their rise to the top of the securitised asset class is notable. Vehicle loans, which previously held the top spot, have now been surpassed. The shift reflects changing borrower preferences and the resilience of gold as a collateral asset, especially in times of economic uncertainty.
According to CRISIL, the securitisation market saw robust activity in Q1 FY27, with gold loan-backed securities accounting for a significant share. The exact percentage increase was not disclosed, but the report emphasised that gold loans have now become the preferred asset class for securitisation.
Impact on the Financial Sector
The trend has implications for both lenders and investors. For NBFCs, securitisation provides a way to free up capital and manage liquidity. For investors, gold loan-backed securities offer a relatively safe investment option due to the underlying collateral. The report noted that the quality of gold loan portfolios remains strong, with low loan-to-value ratios and high recovery rates.
CRISIL also pointed out that the regulatory environment has been supportive, with the Reserve Bank of India encouraging securitisation as a means to deepen the bond market. However, the report cautioned that concentration risk could emerge if NBFCs become overly reliant on a single asset class.
Outlook for the Rest of FY27
Looking ahead, CRISIL expects gold loan securitisation to maintain its momentum, driven by continued demand from NBFCs and investor appetite. Vehicle loans may regain some ground, but gold loans are likely to remain the dominant asset class for the foreseeable future. The report concluded that the securitisation market is poised for further growth, with gold loans leading the way.
