Project title: Securitisation and Indian Experience. Submitted by: Urvi Shah Project guide: Prof.

Sanskruti Kadam Year of submission: 2012

Introduction of the project:

Securitization is the financial practice of pooling various types of contractual debt such as residential mortgages, commercial mortgages, auto loans or credit card debt obligations and selling said consolidated debt as bonds, pass-through securities, or Collateralized mortgage obligation (CMOs), to various investors. The principal and interest on the debt, underlying the security, is paid back to the various investors regularly. The report explores the intricacies of securitization as a process of financial engineering and the market scenario of securitization in India and its impact on the economy.

Objectives of study:
y y y y To understand the basic idea of securitisation To study the structure, process and various asset classes involved in securitization To study the scenario of securitization in India To understand the impact of securitization to the economy as a whole

Scope of study:
The financial services industry is in a state of flux. Increased pressure on operating efficiency, market niches, competitive advantages and capital strength, all provide fuel for rapid changes. Securitisation is one of the solutions to these challenges. The report covers the market scenario of securitization in India and the various lags and impediments that needs to be conquered.

Review of literature:
Review 1: Source Yale School of Management; National Bureau of Economic Research (NBER) - Gary B. Gorton University of Pennsylvania - Finance Department; National Bureau of Economic Research (NBER) - Nicholas S. Souleles

Special Purpose Vehicles and Securitization (September 1, 2005) FRB Philadelphia Working Paper No. 05-21 Link: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=713782## Abstract: The paper analyzes securitization and more generally special purpose vehicles (SPVs), which are now pervasive in corporate finance. The report focuses on potential areas as follows: The first part of the paper provides an overview of the institutional features of SPVs and securitization. The second part provides a model to analyze SPVs, and the conditions under which SPVs are sustainable. Off-balance sheet financing involves transferring assets to SPVs, which reduces the amount of assets that are subject to bankruptcy costs, since SPVs are carefully designed to avoid bankruptcy. Review 2: Source: By Lakshmi Mohandas, Associate, Economic Laws Practice Annual Capital Market Review 03 of BSE - Section III: Market Trends Securitisation Link: http://www.bseindia.com/downloads/Securitisation.pdf

Abstract: The article gives the general view of securitization. Securitisation is the process of pooling and repackaging of homogenous illiquid financial assets into marketable securities that can be sold to investors. Securitisation has emerged as an important means of financing in recent times. A typical securitisation transaction consists of the following steps: y y y Creation of a special purpose vehicle to hold the financial assets underlying the securities; Sale of the financial assets by the originator or holder of the assets to the special purpose vehicle, which will hold the assets and realize the assets; Issuance of securities by the SPV, to investors, against the financial assets held by it.

This process leads to the financial asset being taken off the balance sheet of the originator, thereby relieving pressures of capital adequacy, and provides immediate liquidity to the originator. The legal framework for securitisation in India with the enactment of the The Securitisation and Reconstruction of Financial Assets And Enforcement of Security Interest Ordinance, 2002 (The Act).

Research Methodology:
Formation of a problem what is Securitisation, process and its market scenario in India? Methods of collection of data y For the Project secondary data is collected from internet, books and publications of rating agencies.

Research Limitation Due to its limited application in India collection of Primary data is difficult.