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BFSI Chronicle, 11 Edition September2022
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Securitisation as a technique gained popularity in  Insurance Receivables.
the USA since 1970 and UK is the second largest
market which adopts securitisation of assets.  Commercial Bank Loans.

Securitisation can be defined in simple terms as the
Sale and Purchase of pooled/ bundled Secured  Purchase obligations to Natural Gas Producers.
Assets.
 Credit Card Receivables.
Currently, Securitisation is also used for several
complicated financial structures. There is a steady  Future Rights to Royalty Payments etc.

move towards Securitisation in the Capital Market
of various Assets such as:

Major buyers of such Debt Instruments in the USA
are Mutual funds, Insurance companies, Trust and
corporates with excess liquid funds.

In India, presently, only Mutual Funds and to a lesser
extent Banks with surplus funds can be the buyers.
Insurance Companies may also be buyers.

Securitisation is the Sale and Purchase of Debts and 2021 dtd.: September 24, 2021.
Receivables, normally through Asset Reconstruction Assignment of Debts / NPAs between Banks
Companies (ARCs). ‘inter se’ is Permissible:
Between the banks, the inter se assignment of debts
Asset Reconstruction Companies (ARCs) means or Non-Performing Asset is permissible. Scope of
a Company Registered with RBI for purpose of ‘Banking Business’ is not limited to Core Banking of
carrying on the business of Asset Reconstruction accepting deposits and lending.
or Securitization or both. (Section 2(1) (ba) of
SARFAESI Act inserted w.e.f. 1-9-2016. Purpose of Securitisation:
Generally, a Lender finances a loan to the borrowers

Even though the provisions of Securitisation are and gets repayment of principal with interest over a
contained in the Act relating to Reconstruction period. The lender collects periodic instalments and
of Financial Assets and Enforcement of Security uses them for fi nancing new loans. The above process
Interest, in a practical scenario the provisions are limits the capacity of the lender in disbursing fresh
independent and several Assets which have a good loans till the time he recovers the instalment with
credit rating can also be securitised. interest. Hence instead of waiting till recovery of the
above amount, the lender can pool loans together
RBI Guidelines on Securitization of Standard and sell his right of receiving future payments from
Assets: the borrowers of these loans.
RBI/DOR/2021-22/85 DOR.STR.REC.53/21.04.177/2021-22
Master Direction – Reserve Bank of India This is termed Securitisation of Loans. The original
(Securitisation of Standard Assets) Directions, lender will receive consideration immediately by

The Institute Of Cost Accountants Of India

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