Securitisation: A new product; Indbank Merchant Banking Services

Abstract

Few areas have seen.as fast a growth in post-liberalisation India as has the Finance sector. Indbank Merchant Banking Services Ltd., as one of the top Financial Services Company, offers a wide range of products and services. To take advantage of the opportunities thrown up due to the spurt in economic growth, Indbank plans to expand its portfolio of services. This report explores the viability of Securitisation as a fundbased as well as fee-based activity for Indbank. Securitisation is a powerful financial instrument that allows assets to be removed from the balance sheet of the lending institution and packaged to be funded by the investors. While in the West, this product is exploited to the hilt due to its capability of unfreezing illiquid assets, it is still to be understood and accepted in India. The introduction and increase in awareness of securitisation in Indian financial circles is stymied by legal and procedural obstacles, It is also unviable to securitise many of the receivables in the short term, given the present rate of interest. However, industry experts predict a very bright future for this product in the medium term and beyond. Perhaps the key to introduction of this product as with all complex new products is client education. A thorough study of the mechanism of securitisation is essential to its marketing. What follows is a thorough discussion on the technique, trends in the West, status of securitisation in India and lastly, the utility of this product to Indbank as a fundbased activity as well as a new service in the form of a fee-based activity. The report concludes on the importance of this instrument in the medium term and that Indbank should introduce this service at the earliest to become a dominant player in this niche market.