Securitisation

Subject – Economy

Context – Securitisation volumes pick up post-Q1 FY22 as collection efficiency improves: Report

Concept –

Securitisation is the process of pooling and repackaging of homogenous illiquid financial assets into marketable securities that can be sold to investors.
In return, the investors in such securities get interest.
This process enhances liquidity in the market. This serves as a useful tool, especially for financial companies, as its helps them raise funds.
If such a company has already issued a large number of loans to its customers and wants to further add to the number, then the practice of securitization can come to its rescue.
In such a case, the company can club its assets/debts, form financial instruments and then issue them to investors.
This enables the firm to raise capital and provide more loans to its customers. On the other hand, investors are able to diversify their portfolios and earn quality returns.

India Ratings and Research said securitisation volumes have picked up post the second wave lull in the first quarter of the current fiscal, helped by the improvement in collections.