Securitization Process and Benefits
Learn about securitization of debt and assets, how it differs from factoring, types of securitizable assets, benefits of securitization, and its implementation in the Indian context. Discover the process of converting long-term assets into marketable securities, enhancing capital adequacy, spreading credit risk, and exploring different asset classes for securitization.
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Presentation Transcript
SECURITIZATION UNIT-V PRESENTED BY, DR. T. TAMILMATHI, PG RESEARCH DEPARTMENT OF COMMERCE GOVERNMENT COLLEGE FOR WOMEN(A) KUMBAKONAM
WHAT IS SECURITIZATION? SECURITIZATION OF DEBT OR ASSET REFERS TO THE PROCESS OF LIQUIDATING THE LIQUID AND LARGE TERM ASSET LIKE LOANS AND RECEIVABLES OF FINANCIAL INSTITUTIONS LIKE BANKS ISSUING MARKETABLE SECURITIES AGAINST THEM. IN OTHER WORDS IT IS A TECHNIQUE BY WHICH A LONG TERM NON NEGOTIABLE AND HIGH VALUED FINANCIAL ASSETS LIKE HIRE PURCHASE IS CONVERTED INTO SECURITIES OF SMALL VALUE ,WHICH CAN BE TRADABLE IN THE MARKET JUST LIKE SHARES.
SECURITIZATION VS FACTORING FACTORING IS MAINLY ASSOCIATED WITH THE ASSET OF MANUFACTURING AND TRADING COMPANIES WHERE AS SECURITIZATION IS MAINLY ASSOCIATED WITH THE ASSET OF FINANCIAL COMPANIES. FACTORING MAINLY DEALS WITH TRADE DEBTS AND TRADE RECEIVABLE OF CLIENTS. IN THE CASE OF FACTORING THE TRADE DEBTS AND RECEIVABLES IN QUESTIONS OR SHORT TERM IN NATURE WHERE AS THEY MEDIUM TERM OR LONG TERM IN NATURE IN THE CASE OF SECURITIZATION. THE QUESTION OF ISSUING SECURITIES AGAINST BOOK DEBT DOES NOT ARRAISE AT ALL IN THE CASE OF FACTORING WHERE AS IT FORMS THE BASIS SECURITIZATION.
SECURITISABLE ASSETS TERM LOANS TO FINANCIALLY REPUTED COMPANIES RECEIVABLE FROM GOVERNMENT DEPARTMENTS AND COMPANIES CREDIT AND RECEIVABLES HIRE PURCHASE LOANS LIKE VEHICLE LOANS LEASE FINANCE MORTGAGE LOANS, ETC.
BENIFITS OF SECURITIZATION ADDITIONAL SOURCE OF FUND GREATER PROFITABILITY ENHANCEMENT OF CAPITAL ADEQUACY RATIO SPREADING OF CREDIT RISK LOWER COST OF FUNDING PROVISION OF MULTIPLE INSTRUMENTS HIGHER RATE OF RETURN
SECURITIZATION IN INDIAN CONTEXT GENERALLY SECURITIZATION OF AUTO LOANS HAS BEEN POPULAR IN INDIA ,NOW THE SECURITIZATION MARKET HAS SPREAD INTO SEVERAL ASSET CLASSES, VIZ.., HOUSING LOANS, COMMERCI RECEIVABLE, PROJECT RECEIVABLES, TOLL REVENUES,GOLD LOAN, AND RECENTLY MICROFINANCE LOANS TOO.
