Securitization: The Financial Instrument of the Future

Kolkatta, November 3, 2012

 IAIP was pleased to host CA Vinod Kothari, for a highly interactive session on “Securitization: The Financial Instrument of the Future” at Kolkata on November 3, 2012. The topic of discussion focused on Securitization. He provided insight into Securitization. As Securitization is highly famous & infamous globally, furthermore being in its early stages of Development in India, there was a sense of excitement among fellow members to listen to Kothari; thereby making the session lively.

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Kothari began his presentation by asking the audience about Securitization & got some answers –   Securitization being monetizing of certain assets (receivables) which we would get in the future OR Securitization being Repackaging & transforming of financial assets into marketable paper so that they would no longer remain in the balance sheet.  After an overview on Securitization he moved on to explain the same in detail, its origins, need in modern finance, difference between Indian and global markets for securitization, the processes & advantages. The following are the key highlights:

  • The law, regulations & guidelines in India on Securitization was clearly elucidated. He clarified the usage of Securitization in India which is often connected to Re-possession notices & understood as a recovery instrument (SARFAESI act).
  • In the Indian context, the ballooning use of Securitization in Priority Sector Lending was detailed. Mainly used by banks (primarily foreign banks & other non retail banks) to buy priority sector loans & advances from other intermediaries. Over here in India, securitization is used as direct assignment basis i.e. partial or whole transfer of a portfolio.
  • Primary advantages of Securitization include savings of regulatory capital & protection from bankruptcy of the originator.
  • Securitization of various Asset Backed securities (differentiated on the basis of collateral involved) as well as the recent RBI guidelines on Securitization (mainly directed towards direct assignment of portfolios & securitization) was explained. These guidelines issued in May 2012, have significantly shrunk the securitization market.

About the Speaker: 

Vinod Kothari, is internationally recognized as an author, trainer and expert on specialized areas in finance, including securitization, asset-based finance, credit derivatives, accounting for derivatives and financial instruments, housing finance, etc. He is a Chartered Accountant and a Company Secretary. He was part of an Asian Development Bank consulting group to advise the Govt. of India on reforms in secured lending law.

Kothari is currently a Visiting Faculty at Indian Institute of Management, Joka, Calcutta teaching structured finance. He is also an independent director in several companies – JSW Ispat Steel, Gontermann Peipers, Greenply, Rupa, Allbank Finance.

Contributions from: Vinay Bagri, CFA, IAIP Volunteer

Photographs from: Volunteers

About IAIP

India Association of Investment Professionals (IAIP), which is established April 2005 and located in Mumbai, is an association of local investment professionals. As one of the 136 CFA Institute member societies, IAIP connects members to a global network of investment professionals. Consisting of portfolio managers, security analysts, investment advisors, and other financial professionals, IAIP promotes ethical and professional standards within the investment industry, facilitates the exchange of information and opinions among people within the local investment community and beyond, and works to further the public’s understanding of the CFA designation and investment industry.
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