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BFSI Chronicle, 11  Edition September 2022
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           can be summarised as follows:                           Marketable Securities.

              Banks can remove such loans from their          Transfer of Funds from a less effi cient  Debt
                 Balance Sheet and this reduces the regulatory     Market to a more Efficient Capital Market

                 capital requirement.                              through Securitisation.

              It is an alternative to Banks and Financial  Conclusion:
                 Institutions for the transfer of Funding Risk  For Originator, Securitisation mainly results in
                 and development of the Capital Market.       Receivables being replaced by Cash which improves
                                                              the liquidity position of the  firm. It removes the

              Reduce Lending Concentration and Improve  assets from the balance sheet of the Originator thus
                 Liquidity.                                   releasing the Capital for other uses and enabling
                                                              the Restructuring of the Balance Sheet by reducing
              Attainment of Funds at Lower Costs since  Large Exposures or Sectoral Concentration.
                 these are Isolated from Potential Bankruptcy
                 Risk of Originator.                          It facilitates good Asset Liability Management
                                                              by reducing Market Risks which can arise due to
              Better matching of Assets and Liabilities and  Interest Rate mismatches. This process also enables
                 development of Long-term Debt Market.        the originator to recycle assets more frequently and
                                                              thus improve the institution’s earnings. Finally,

              Provides a Diversified Pool of uniform Assets  transparency may be improved since Securitisation

                 to Banks and Financial Institutions.         results in more Identifiable Assets on the Balance
                                                              Sheet.
              Converting Non-Liquid Assets into Liquid




                                                            In brief, Originator Transforms his Illiquid Assets
                                                            like  Mortgages,  Lease  Rentals  etc.  into  Liquidi-
                                                            ty  by  raising  funds  on  them  which  can  be  used
                                                            to increase Business. The Cost of Raising funds
                                                            will be Lower as there will be a Wider Investment
                                                            Base  and  Liquidity. Also,  the  Credit  Risk  of  the
                                                            originator will be diversifi ed.





           References:
                                                              •  ‘Origin of Securitisation’ information from
           •  RBI Circulars on Securitisation.                   various Websites.














           The Institute Of Cost Accountants Of India

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