Foreign Lenders Expand Presence As India’s Asset-Backed Debt Market Hits Record

India’s asset-backed securities market reached a record size in FY25, with foreign banks increasing purchases of securitised debt to gain exposure to the country’s expanding retail credit market.

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According to Crisil Ratings, overseas lenders accounted for nearly 35% of total asset-backed debt issuances during the year ended March 2025, compared with 28%-30% in each of the previous two financial years. With overall issuance touching ₹1.53 lakh crore, foreign banks’ participation translated into investments of around $5.6 billion.

The rise in demand comes as India’s retail lending market continues to expand, creating a larger pool of loans that can be packaged and sold. Banks also benefit from priority-sector lending requirements and lower regulatory capital usage compared with certain forms of direct lending.

Overseas Banks Increase Exposure

As per reports, lenders including Barclays Plc, Citigroup Inc., JPMorgan Chase & Co. and Standard Chartered Plc have stepped up investments in these instruments.

Speaking to Bloomberg, Aditya Bagree, Head of Markets for India and the Subcontinent at Citigroup, said the attraction for foreign investors extends beyond higher yields and offers access to a rapidly growing domestic credit market.

Asset-backed securities are debt instruments backed by pools of loans, including mortgages, vehicle loans, personal loans and gold loans. In India, such transactions are mainly structured through pass-through certificates and direct assignments.

According to Crisil data, securities rated AAA, AA and A currently carry coupon rates ranging from 7.3% to 11.5%. Loan pools sold by non-banking financial companies generally have residual maturities between one and two-and-a-half years.

Large Deals And Lower Funding Costs

The market received a boost last September when Reliance Group entities raised ₹21,000 crore through securitised debt transactions, among the largest deals undertaken in the country.

Financial institutions are increasingly using the route to diversify borrowing sources. HDB Financial Services, a subsidiary of HDFC Bank, sourced nearly 3% of its liabilities through pass-through certificates as of March-end, compared with no exposure a year earlier.

Aye Finance also benefited from the market. Speaking to Bloomberg, Chief Financial Officer Gaurav Seth said securitised borrowings were 75-100 basis points cheaper than issuing bonds because the transactions received ratings several notches higher than the company’s own credit profile.

Although India’s securitisation market remains smaller than China’s, where issuance stood at 2.28 trillion yuan last year, growing participation from global banks is supporting expansion. Rising demand for Indian credit assets is also encouraging non-bank lenders to rely more on securitisation as they seek diversified and cost-efficient funding avenues.