Indian Securitization Market - The Pros and Cons

Abstract

Securitization is a financial instrument has had an extremely significant impact on the world’s financial system because it integrates capital markets and the uses of resources such as originators, mortgage, governments, finance companies, etc. Securitization has strengthened the trend towards disintermediation. Having been able to minimize agency costs, it has made lending more efficient; Evidence of Securitization can be observed in the mortgage markets. By permitting firms to originate and hold assets off its balance sheet, it has generated higher levels of leverage and greater economies of scale. In India securitization is getting popular due to its effectiveness. The combination of securitization techniques with credit derivatives and risk transfer devices are continued to develop innovative methods for minimizing risk, The risk can be transformed into a commodity which allow the various market participants and investors to enter into the sectors which were otherwise not open to them.