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Contents

What is securitization?

Definition

Structured Securities Vs ConventionalSecurities

Securitization Vs Factoring

Stages Of Securitization

Structure for Securitization / Types Of

Securities

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Other contents

Securitisable assets

Benefits Of Securitization

Securitization And Banks Conditions For Successful Securitization

Securitization in Abroad and in India

Causes For Unpopularity Of Securitizationin India

Future Prospects

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What is securitization?

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Securities

Cash

Assets

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Definition

Henderson , J. and Scott, J. P, Securitization is theprocess which takes when a lending institutionsassets are removed in one way or another from thebalance sheet of that lending institution and are

funded instead, by investors who purchase anegotiable financial instrument evidencing thisindebtedness without recourse, or in some caseswith limited recourse, to the original lender.

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Why Securitisation?

1. A convenient mechanism to suit changingneeds of borrowers and lenders

2. Matches supply of funds with demanddemands for funds through floatingnegotiable securities

3. Shifts the source of repayment from earning

to a pool of assets

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Parties to securitizations

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Stages Of Securitization

Identification

Transfer

Issue

Redemption

Credit Rating

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Structured Securities Vs Conventional

Securities

Sources Of Repayment

Structure

Nature

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Securitization Vs Factoring

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Structure for Securitization

Types Of Securities Pass through and Pay through Certificates,

Preferred stock certificates ,

Assets based commercial papers.

Other Types

Interest only certificates ,

Principal only certificates.

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Continue..

Pass Through Certificates:

Sale of asset to SPV

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Securitisable Assets Term loan finance

Credit card receivables

Car loan

Mortgage loans

Lease finance

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Benefits Of Securitization

1. Additional Source Of Fund

2. Greater Profitability

3. Enhancement Of Capital Adequacy Ratio

4. Spreading Of Credit Risk5. Lower Cost Of Funding

6. Provision OfMultiple Instruments

7. Higher Rate Of Return

8. Prevention of Idle Capital9. Better than Traditional Investment

10.Other Benefits

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Securitization And Banks

Innovative and Low Cost Source Of Funds

Better Capital Adequacy Norms

Creation OfMore Credit

Increased Profitability

Tools For Asset-liability Management and Risk

Management

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Conditions For Successful

Securitization Ability of the original borrower

Credit rating

Separate entity

Listing of stock exchange

Two way quotation

Uniformity

Accounting norms

guidelines

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Threats to Securitization

i. New Concept

ii. Heavy Stamp duty and Registration Fees

iii. Cumbersome Transfer Procedures

iv. Difficulty in Assignment of Debt

v. Absence of Standardized Loan Documentation

vi. Inadequate Credit Rating Facilitiesvii. Absence of Proper Accounting Procedures

viii.Absence of Proper Guidelines