Structured Finance and Securitization in India
| International Journal of Economics and Management Studies |
| © 2018 by SSRG - IJEMS Journal |
| Volume 5 Issue 6 |
| Year of Publication : 2018 |
| Authors : Akhil M P |
10.14445/23939125/IJEMS-V5I6P104
How to Cite?
Akhil M P, "Structured Finance and Securitization in India," SSRG International Journal of Economics and Management Studies, vol. 5, no. 6, pp. 26-31, 2018. Crossref, https://doi.org/10.14445/23939125/IJEMS-V5I6P104
Abstract:
Structured financing is customized debt financing which fulfills the needs of the issuer where other standard financial products cannot meet. The popular as well as widely used structured financing alternative is securitization. The market for securitization products in India shows a greater growth and tends to innovation. The securitized products are blamed as one of the causes of the International financial crisis in 2008 why because the market for securitized products is unregulated. Its impact on Indian economy was either limited or no impact because of India’s restrictive market practices. After the economic crisis, Indian banking regulators imposed a prudential regulation on assignment and securitization of standard and non-performing assets in tone with global norms. Apart from direct assignment by one financial institution to other, there are two major structures namely pass-through structure and pay – through structure. In India pass-through structure is extensively used, in rare cases pay-through structure used within the pass- through structure. Pass- through structure is typically in the form of securitized paper called pass-through certificates (PTCs). There is no institutionalized set up for regulating securitization in India. Reserve Bank of India (RBI) is now supporting securitization market. The RBI has also significantly contributed to the market by constantly reviewing and strictly implementing the Priority Sector Lending (PSL) norms. Indian banks and NBFCs are showing an increased participation in the securitization market. Major areas of securitized products are housing loan, commercial vehicle loan, and microfinance. This paper concentrates on structured finance and securitization in the Indian scenario.
Keywords:
Structured Financing, Securitization, Pass–through Structure, Special Purpose Vehicle
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