Synopsis: Citigroup Inc.'s India division plans to triple its asset-backed securities (ABS) holdings to over $1 billion by the end of the current fiscal year, aiming to enhance liquidity amid sluggish deposit growth among domestic lenders. This move aligns with the expanding securitization market in India, which saw an 80% year-on-year increase in volumes, reaching ₹68,000 crore in the third quarter of FY25.
In response to the liquidity challenges faced by domestic lenders due to slow deposit growth, Citigroup Inc.'s India unit is set to significantly increase its investment in asset-backed securities (ABS).
The bank plans to expand its ABS portfolio to over $1 billion by the end of the fiscal year, effectively tripling its current holdings.
This strategic move is designed to provide much-needed liquidity in the financial system and capitalize on the burgeoning securitization market in India.
Growth of India's Securitization Market:
The securitization market in India has experienced remarkable growth, with volumes surging by more than 80% year-on-year to ₹68,000 crore in the third quarter of FY25.
This expansion is largely attributed to increased participation from private sector banks, which have traditionally been less active in this space.
These banks are now leveraging securitization to improve their credit-to-deposit ratios amid challenges in deposit mobilization.
Citi India's Focus and Market Projections:
Aditya Bagree, Managing Director and Head of Markets at Citi India, highlighted the nascent yet rapidly evolving nature of India's securitization landscape.
Citi India plans to focus its investments on ABS linked to retail loans, including mortgages and auto loans.
The bank anticipates that pass-through certificates (PTCs), a common form of ABS in India, will constitute approximately 60% of the country's total securitization deals this financial year, as direct assignment transactions decline.
Looking ahead, Citi projects that India's total securitization volume could approach $30 billion by the fiscal year ending March 31, 2026.
This optimistic outlook is supported by the entry of large private banks into the securitization market, a domain previously dominated by non-banking financial companies (NBFCs) and housing finance firms.
For instance, HDFC Bank securitized or assigned nearly Rs. 2.16 billion of retail loans in the three months ending December 2024 and plans to scale up these activities.
Conclusion:
Citigroup's strategic decision to amplify its investment in asset-backed securities underscores the dynamic shifts within India's financial sector.
As traditional deposit growth faces headwinds, both domestic and international banks are increasingly turning to securitization as a viable avenue to bolster liquidity and optimize balance sheets.
This trend not only reflects the maturation of India's financial markets but also highlights the growing confidence of global financial institutions in the country's economic trajectory.
Disclaimer: This article is for informational purposes only and does not constitute financial advice. Readers are encouraged to consult with a qualified financial advisor before making any investment decisions.
