OTD Model, an extremely efficient tool if properly used in India: Dr. Manoj Vaish

Dun & Bradstreet, the world's leading provider of global business information, knowledge and insight along with IFMR Capital organized a conference on ‘Originate-to-Distribute Model of Credit Provision and its Future in Financial Systems Design’. This conference dwelled on the strengths and weaknesses of the originate-to-distribute model in India based on global experience.

Discussing the significance of the OTD model, Dr. Manoj Vaish, President and CEO– India, Dun & Bradstreet said, “The OTD model can be an extremely effective process in redistribution of risks & refinancing of lending & originating institutions. While the turmoil in the international financial markets has brought out certain challenges that lack controls & risk management, it does not take away from the fact that OTD is an extremely efficient tool if properly used in India. Though it is in its nascent stage in India and has a long way to go”.

Highlighting the key features of the OTD model, Mr. Prasad Kopalkar, Head - Structured Finance Ratings, CRISIL, added, “With adequate safeguards & disclosures the OTD model can provide significant benefits in widening access to capital for socially weaker sectors”.

Dr. Nachiket Mor – President, ICICI Foundation for Inclusive Growth & Chairman – Advisory Council, IFMR Trust said, “Micro finance through the self help group mechanisms or NABARD refinancing Co-operative Banks are good examples of careful loan origination where risks were transferred to the balance sheets of large well capitalized organizations.”

Expressing his views at the event, Dr. Anurag Gupta, Associate Professor – Finance Department, Weatherhead School of Management, Case Western Reserve University, USA, said “The OTD model has not been fully developed & exploited in India & that’s why we have not seen most of the problems faced outside. That does not mean that we should not pay attention to the pitfalls & problems that have been experienced elsewhere. We need to learn from those mistakes & see we do not repeat them”.

Speaking on the challenges faced, Dr. Sona Varma, Senior Advisor, IFMR Foundation, said “Despite the global financial crisis, the intrinsic value of OTD Model in providing financial services cannot be denied. Panelist recognize that important lessons can be learnt to see that the model succeeds in providing finance especially to the unbanked population in India”.

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