NBFC Securitisation Gains Attention as ICRA Rates MSME Loan-Backed Transactions
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NBFC Securitisation Gains Attention as ICRA Rates MSME Loan-Backed Transactions
Non-banking financial companies (NBFCs) are increasingly using structured finance mechanisms to manage their lending portfolios and access alternative funding channels. One such mechanism is securitisation, which allows lenders to convert pools of existing loan receivables into financial instruments that can be offered to investors.
Recent rating actions by ICRA highlight the continued use of this financing structure across India's MSME lending ecosystem.
On 5 November 2026, ICRA assigned a provisional [ICRA]AA+(SO) rating to Series A1 Security Notes issued by Maison 10 2026, backed by a pool of secured small-business loan receivables originated by Oxyzo Financial Services Limited.
The following day, ICRA also confirmed the final rating for pass-through certificates (PTCs) issued under an unsecured MSME business loan securitisation transaction originated by NeoGrowth Credit Private Limited.
These developments highlight how securitisation structures are being used across different lending segments, including secured small-business financing and unsecured MSME lending.
ICRA An Affiliate of Moody's+1
For NBFCs, the development is relevant because funding diversification, liquidity management and the performance of underlying loan portfolios remain central to their financial strategy.
1. What is happening in the NBFC securitisation market?
The recent ICRA announcements involve two different types of MSME loan portfolios.
Oxyzo Financial Services
ICRA assigned a provisional [ICRA]AA+(SO) rating to Series A1 Security Notes issued by Maison 10 2026.
The transaction is backed by a pool of secured small-business loan receivables originated by Oxyzo Financial Services Limited.
NeoGrowth Credit
On 6 November 2026, ICRA confirmed the final rating for PTCs issued under an unsecured MSME business loan securitisation transaction originated by NeoGrowth Credit Private Limited.
The confirmation of a final rating follows the provisional rating stage and the completion of the relevant transaction requirements.
The two transactions demonstrate the use of structured finance for different categories of MSME lending assets. They should not, however, be interpreted as evidence that the underlying originators have received equivalent corporate credit ratings.
ICRA An Affiliate of Moody's+1
2. How does securitisation work?
Securitisation is a financial process through which a lender pools eligible loans and uses the receivables from those loans to support securities issued through a separate transaction structure.
In a typical transaction:
Loan origination: An NBFC provides loans to businesses or individual borrowers.
Portfolio selection: A pool of eligible loan receivables is identified for securitisation.
Transfer of assets: The selected receivables are transferred to a special purpose entity or trust in accordance with the applicable transaction structure.
Issuance of securities: The structure issues instruments such as pass-through certificates to investors.
Collection and distribution: Borrower repayments are collected and distributed to investors according to the agreed payment waterfall.
The underlying loan receivables generate the cash flows used to meet the payment obligations of the securities.
Asset-Backed Security Guide: Insights and Strategies for 2025 | Historic Financial News
The structure can help lenders obtain liquidity against eligible loan assets while providing investors access to exposures supported by defined receivable pools.
However, securitisation does not automatically eliminate the originator's credit exposure. The actual risk transfer depends on the structure, retained exposures, credit enhancement and applicable regulatory requirements.
3. Why are NBFCs using securitisation?
NBFCs require consistent access to funding to support their lending operations.
Traditional borrowing channels include bank loans, non-convertible debentures, commercial paper and other institutional funding arrangements.
Securitisation provides another financing route, subject to regulatory and transaction requirements.
Some of its potential advantages include:
Liquidity generation
An NBFC can access funds against eligible loan receivables rather than waiting for the entire loan portfolio to mature.
Funding diversification
Securitisation can provide access to a different investor base, reducing exclusive dependence on conventional borrowing arrangements.
Portfolio management
The structure allows lenders to manage selected loan pools and evaluate their performance independently.
Investor participation
Investors can obtain exposure to defined asset pools through structured instruments, subject to the associated credit and transaction risks.
Balance-sheet and capital considerations
Depending on the structure and applicable accounting and prudential rules, securitisation may affect the originator's balance-sheet exposure and capital requirements. These benefits are not automatic and depend on whether the transaction meets the relevant derecognition and risk-transfer criteria.
4. Why does the type of underlying loan portfolio matter?
The Oxyzo and NeoGrowth transactions provide an interesting comparison.
One involves secured small-business loan receivables, while the other involves unsecured MSME business loan receivables.
The underlying asset pool is one of the most important elements in a securitisation assessment.
Secured MSME loans
For secured business loans, the assessment can consider:
Nature and quality of collateral.
Loan-to-value ratios.
Valuation and documentation standards.
Borrower repayment history.
Recovery mechanisms in case of default.
Collateral provides an additional recovery avenue, although its value and enforceability remain important.
Unsecured MSME loans
Unsecured lending does not have the same collateral-based recovery mechanism.
Consequently, the assessment needs to pay particular attention to:
Borrower credit profiles.
Historical repayment behaviour.
Delinquency trends.
Geographic and industry concentration.
Collection and recovery efficiency.
Historical default and loss experience.
The difference between these portfolios illustrates why securitisation ratings are based on the characteristics of the underlying assets and the transaction structure, rather than simply the reputation or size of the originating NBFC.
5. What does a structured finance rating actually assess?
An important distinction exists between a corporate credit rating and a structured finance rating.
A corporate credit rating primarily evaluates an entity's ability to meet its debt obligations.
A structured finance rating evaluates the ability of a particular financial structure or instrument to meet its payment obligations according to the agreed terms.
ICRA's structured finance methodology considers several aspects.
Underlying asset quality
The repayment history, borrower profile, delinquency trends and expected losses within the loan pool.
Credit enhancement
Additional protection available to investors, where applicable, through mechanisms such as cash collateral, subordination or other transaction-specific support.
Cash-flow structure
The expected timing and availability of collections, payment priorities and the distribution of cash flows.
Originator and servicer capabilities
The ability of the originating lender to maintain loan records, collect repayments, manage defaults and service the underlying portfolio.
Legal and transaction documentation
The enforceability of asset transfers, contractual obligations and other legal protections built into the structure.
ICRA's rating methodology also uses cash-flow modelling under different scenarios to assess the probability and severity of potential defaults.
ICRA An Affiliate of Moody's+1
6. RBI's regulatory framework for NBFC securitisation
Securitisation transactions undertaken by NBFCs operate within a defined regulatory framework.
The Reserve Bank of India issued the Reserve Bank of India (Non-Banking Financial Companies – Securitisation Transactions) Directions, 2025, dated 28 November 2025. The directions were subsequently updated as of 1 July 2026.
The framework addresses several aspects of securitisation, including:
Eligibility of assets for securitisation.
Minimum retention requirements.
Origination standards.
Payment priorities and observability.
Limits on retained exposures.
Issuance and listing requirements.
Conditions applicable to special purpose entities.
Representations and warranties.
These requirements are intended to support transparency, appropriate risk retention and sound transaction structures.
Reserve Bank of India
For NBFC management teams, understanding these requirements is important when evaluating securitisation as part of their broader funding strategy.
7. What should NBFCs consider before undertaking securitisation?
While securitisation can provide access to an alternative source of funding, a successful transaction requires preparation well before the issuance stage.
NBFCs should focus on the following areas.
1. Maintain reliable loan-level data
Detailed information on borrower profiles, loan disbursements, repayments, outstanding balances and delinquencies is essential.
2. Establish consistent underwriting standards
Investors and rating agencies need visibility into how borrowers are selected, evaluated and monitored.
3. Monitor portfolio performance
Historical collection efficiency, delinquency movement and default trends help establish the quality of the underlying loan pool.
4. Maintain strong servicing capabilities
The originator's ability to collect repayments and manage overdue accounts remains important even after the receivables are transferred.
5. Ensure legal and documentation readiness
Asset transfer agreements, trust documentation, servicing arrangements and other transaction documents need to be appropriately structured.
6. Evaluate the economics of the transaction
Management should assess the costs, credit enhancement requirements, retained exposures and operational implications before choosing securitisation as a funding route.
8. What does this mean for India's MSME financing ecosystem?
MSMEs depend on access to institutional finance to support expansion, working capital and business operations.
NBFCs play an important role in serving borrowers who may have different financing requirements from those typically addressed by traditional banking channels.
When lenders have access to diversified funding mechanisms, they have additional options for managing their loan portfolios and liquidity requirements.
Securitisation can therefore form an important part of the broader MSME financing ecosystem.
However, the availability of funding through securitisation ultimately depends on the quality of the underlying assets, the strength of the transaction structure and investor appetite.
For businesses, this also reinforces the importance of maintaining reliable financial records, transparent operations and disciplined repayment practices.
The bigger takeaway
The recent ICRA rating actions involving Oxyzo and NeoGrowth demonstrate how structured finance is being applied to different categories of MSME lending.
For NBFCs, securitisation offers an additional mechanism for managing loan receivables and accessing institutional funding. At the same time, it requires strong underwriting, reliable portfolio data, effective servicing and appropriate transaction documentation.
For the wider lending ecosystem, the quality of the underlying borrower pool remains fundamental to the sustainability of these financing structures.
Ultimately, access to institutional capital depends not just on the availability of funding channels, but also on the quality and transparency of the credit exposures supporting them.
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Disclaimer
This article is intended for general informational and educational purposes only and does not constitute financial, investment, legal or lending advice. The rating actions discussed are based on publicly available rating disclosures. Structured finance ratings apply to specific instruments and transaction structures and should not be interpreted as corporate credit ratings of the originating NBFCs. Credit ratings are independently assigned by SEBI-registered Credit Rating Agencies. FinMen Advisors and Consultants Private Limited provides Credit Rating Advisory and does not issue, influence or guarantee any credit rating or rating outcome.
