Banks See Car Prop In Securitisation

Capital-starved banks will be the first off the block to tap the securitisation route once the Securitisation Bill is passed in Parliament.

By securitising their loans, and thereby downsizing their balance sheet, banks will be able to maintain the capital adequacy ratio (CAR).

The Reserve Bank of India (RBI) is working on the norms on how the receivables (cash flows) from the loan portfolio flow so that there is no recourse to the originator (bank).

Securitisation will enable banks to churn their assets and achieve a higher turnover without infusion of fresh capital.

The RBI is also expected to announce investment guidelines for banks seeking to invest in the securitised bonds. Some banks have already invested in such papers but many of them are waiting for the central bank