Inside India’s $28 Bn Securitization Boom: Rise of Trade Receivables as an Asset Class
India’s securitization landscape is undergoing a structural transformation. Once dominated by retail assets and traditional NBFC-originated loans, the market is now embracing new asset classes—particularly trade receivables—as businesses seek more agile and cost-efficient ways to unlock capital.
Amid this shift, CredAble has emerged as a market-moving force, having structured and executed over ₹250 crore in trade receivables securitization via Pass-Through Certificates (PTCs). Collaborating with marquee institutions like Aditya Birla Capital, Godrej Capital and Kotak Mutual Fund, CredAble is not only enabling liquidity for corporates and MSMEs but also deepening investor participation in this emerging asset class. Its pioneering deal with Northern Arc Capital—India’s first listed trade receivables securitization—has set a new benchmark, introducing capital markets to invoice discounting and expanding access to working capital for vendors across sectors.
This convergence of structured finance, real-time data, and fintech innovation is pushing securitization into mainstream capital strategy—no longer a niche tool, but a key pillar of India’s $28 Bn market in FY25.
Whether it’s a renewable energy firm recycling capital, an NBFC aiming to deleverage, or a conglomerate monetizing long-term receivables, securitization offers a tailored pathway to unlock capital, optimize risk, and tap into specialized investor bases.
The Mechanics of Trade Receivables Securitization
Trade Receivables securitization (TRS) involves pooling future cash receivables—such as invoices or trade receivables—and converting them into marketable securities. These securities are sold to investors through Special Purpose Vehicles (SPVs), providing businesses/investors with immediate liquidity while transferring credit risks to investors.
Key Benefits
- Liquidity Optimization: Immediate monetization of receivables frees up working capital.
- Cost Efficiency: Securitization often provides funding at lower costs compared to traditional loans.
- Risk Diversification: By isolating receivables into SPVs, businesses can shield themselves from customer defaults.
Market Dynamics: The Numbers That Matter
Securitisation allows financial institutions, especially non-banking financial companies (NBFCs), to free up liquidity by selling these assets, thus allowing them to generate more loans and scale their operations. Securitisation can apply to various types of loans, including mortgages, vehicle loans, personal loans, and more. The primary types of securitisation in India are Direct Assignments (DA) and Pass-Through Certificates (PTC).
- Direct Assignments (DA): In a DA transaction, an originator sells a pool of loans directly to another financial institution without the creation of securities. It’s a simpler and faster process that provides the selling entity with immediate liquidity.
- Pass-Through Certificates (PTC): Here, the originator sells a pool of loans to a special purpose vehicle (SPV), which then issues certificates (PTCs) to investors. These certificates represent the investors’ claim on the cash flow from the loans, thus spreading the risk across multiple parties.
The Rebalancing of DA and PTCs: A Structural Shift in Progress
Historically, Direct Assignment (DA) dominated Indian securitization due to its simplicity, bilateral nature, and absence of credit enhancement or rating requirements. Under DA, loan pools are directly sold from originator to buyer (typically banks) with minimal structuring. In FY24, DA transactions crossed ₹1.4 lakh crore, propelled by co-lending structures, mortgage pools, and microfinance DA deals.
Conversely, Pass-Through Certificates (PTCs) have gained traction as institutional investors seek yield-bearing, tradable paper backed by granular retail and MSME receivables. PTCs, often issued via trusts or SPVs, bring with them credit enhancement, pooling diversity, and potential for secondary market liquidity. The resurgence of PTCs in the past two years—especially from FinTechs using APIs and algorithmic pool selection—signals growing sophistication in deal structuring.
Key Trends:
- PTC volumes increased 45% YoY in FY24, with strong appetite from mutual funds, AIFs, and family offices.
- Co-lending + DA is emerging as a hybrid model for NBFCs to originate, disburse, and de-risk.
- PTC maturity tenors are shortening, with monthly amortizing structures replacing traditional bullet repayments—enhancing cash flow predictability.
| Attribute | PTC Securitisation | DA Securitisation |
|---|---|---|
| True sale | Yes | Yes |
| Transferability of a single loan | No | Yes |
| Bankruptcy remoteness | Yes, provided SPV does not get consolidated | Yes |
| Special purpose vehicle | Yes | Yes, but as a joint ownership |
| Participation by multiple investors | Purchase of the securities of the SPV | Purchase of the underlying pool |
| Nature of investment made by the investor | Purchase of securities | Purchase of loans |
| Rating of the securities | Usually obtained, and may go up to AAA | No question, as investor buys a pool of loans |
| Upfront realization of profit | Possible | Based on individual loans |
| Due diligence by investor | Usually based on the evaluation of the securities of SPV | Required |
| Use of excess spread to meet losses | Yes | No |
| Servicing fee | Most commonly yes | Yes |
| Cap on extent of servicing fee | 20% | No such cap |
| Cap on the extent of credit enhancement | 20% | Not necessarily yes |
| Accounting norms for originator | On the underlying loans | On underlying loans |
| Accounting from the investor | Purchase of a security | Purchase of loans |
| Capital relief for issuer/seller | Capital allocated to the extent of first loss support | Full capital relief, as originator provides none |
| Pricing | Based on the pricing of the resulting securities | No. Loans may be marked at considering losses and prepayments up to a certain level |
| Liquidity from investor perspective | Yes, the PTCs are transferable. The SPV may allow other investors to buy PTCs being sold by an outgoing investor | No. Loans may be repurchased but not easily assigned |
| Conversion into a standard marketable denomination (e.g., USD 1 million per unit) | Possible | Not possible. The whole loan has to be transferred |
| Tax issues | Not usually very simple to execute. Tax issues currently faced on taxation of SPVs | No tax issues at all, as direct transfer |
| Off balance sheet treatment | Yes, subject to conditions | Yes, subject to conditions |
| Credit enhancement | Allowed | Not allowed |
The Two Pillars: RBI-led vs SEBI-led Securitization
India’s securitization market operates under a dual regulatory regime. The distinction is technical but foundational:
- RBI-Led Securitization pertains to balance sheet exposures of banks and NBFCs—primarily retail and MSME loan pools. These are typically Pass-Through Certificates (PTCs), where originators sell loans to a Special Purpose Vehicle (SPV) that issues PTCs to investors.
- SEBI-Led Securitization, on the other hand, governs market-linked securitized debt instruments, issued by SPVs or trusts that aren't necessarily NBFCs. It’s here we see Structured Finance Instruments (SFIs) such as Asset-Backed Securities (ABS) and Mortgage-Backed Securities (MBS) gaining traction in capital markets.
| Feature | RBI-Led | SEBI-Led |
|---|---|---|
| Target Originators | Banks, NBFCs, HFCs | STs, AIFs, Investment Managers |
| Pool Type | Standard retail/MSME loans | ABS/MBS via public trust route |
| Disclosure | Private reporting | Public disclosure & listing |
| Trading | Private placement/DA | Exchange-tradable PTCs |
| Yield Curve | Linked to loan coupon | Market-priced |
As per Crisil, ₹1.9 lakh crore of securitized instruments in FY24 were under RBI-regulated PTCs, while ₹1.083 lakh crore was under PTC structure issuances—a growth of over 35% YoY.
Receivables Securitization: Beyond Consumer Loans
Historically, retail assets such as auto loans, MFI loans, and mortgages dominated the securitization landscape. However, receivables securitization, particularly trade receivables and SME cash flows, is growing fast.
Rise of Non-Traditional Asset Classes
- Invoice Discounting and Supply Chain Finance (SCF): Fintech platforms are now originating and securitizing short-tenure receivables (30–90 days), using dynamic pool structures.
- Lease Rentals and Subscription-Based Contracts: With the rise of SaaS and D2C startups, cash flows from lease or subscription contracts are being securitized into quasi-revenue-backed instruments.
- Embedded Receivables via API Fintechs: Platforms now use APIs to capture real-time invoice data and build self-liquidating instruments for sale to investors.
The composition of securitized assets has evolved, especially in the segment of Business Loans which has Increased from 5% to 11%, indicating growing confidence in the securitization of commercial lending.
Growing Bank Participation and Investor Interest
In FY2024, bank-originated securitisation volumes grew by over 50%, reaching ₹10,000 crore, up from ₹6,600 crore in FY2023. Private sector banks continue to dominate the PTC market, with 41% of total securitisation volume coming from them.
The Fintech Factor: Embedded Liquidity & Structuring Innovation
Fintechs are adding a new dimension to securitization:
a. API-Driven Pooling & Real-Time Originations
Fintech platforms integrated into ERP systems and e-commerce networks are:
- Accessing receivables in real time
- Dynamically assessing risk and default probabilities
- Creating and rating securitized pools within days
b. AI-Powered Risk Engines
AI and ML are now driving:
- Dynamic Credit Enhancements: Cash collateral based on risk predictions.
- Hyper granular Tranching: Up to 5–6 tranches based on borrower behaviour.
c. Fintech-Led Innovations:
- Dynamic Pool Refresh: Real-time updates of eligible receivables reduce risk drag.
- AI-Based Pool Selection: Receivables are selected based on region, credit score, payment history.
- Tokenized PTCs (Non-Blockchain): Smart contracts enable fractional investor access.
- Daily Yield Payouts: Making PTCs more attractive to treasury and family office investors.
Case in Highlight: CredAble’s Innovation in Trade Receivables Securitization with Northern Arc
A notable example of innovation in this domain is the collaboration between CredAble and Northern Arc, which led to the closure of India's first listed trade receivables securitization transaction. This pioneering deal introduced capital market investors to "invoice discounting" as a new asset class, enabling indirect exposure to high-quality corporates.
Structure and Impact
- Asset Pool: The transaction was backed by approved trade receivable invoices from multiple vendors across various sectors.
- Investor Participation: By listing the securitized instruments, a broader range of investors could participate, enhancing market liquidity.
- MSME Support: The structure facilitated timely funding for vendors, including Micro, Small, and Medium Enterprises (MSMEs), bridging critical working capital gaps.
This initiative exemplifies how securitization can be tailored to address specific market needs, fostering financial inclusion and market development.
Strategic Applications of Receivables Securitization
Beyond liquidity enhancement, receivables securitization serves several strategic purposes:
- Capital Recycling: Enables companies to redeploy capital from existing assets into new growth opportunities without additional leverage.
- Risk Management: Facilitates the transfer of credit risk associated with receivables to investors, improving the originator's risk profile.
- Investor Diversification: Opens avenues to tap into a diverse investor base, including institutional investors seeking exposure to asset-backed securities.
From Risk Transfer to Growth Acceleration
The future of securitization in India lies not just in offloading risk, but in unlocking growth capital in real time. As receivables become programmable assets, powered by data, APIs, and AI-led credit analytics, the lines between capital markets, credit markets, and tech platforms are blurring. The regulatory duality—RBI’s prudence and SEBI’s openness—is catalysing innovation without losing control.
This is no longer just a story of structured finance—it’s the infrastructure of future cash flow economies.
Think Working Capital… Think CredAble!