Blockchain For Securitisation: The Benefits Of Evolution

Securitisation market records 50% growth in Q1

Enhanced liquidity and reduced risk in securitisation with intelligent blockchains

RBI has also set-up a committee for the development of housing finance securitisation

In the recent debate on the government draft proposals on blockchain technology, so much that be done with blockchains within current regulations and under the proposed framework has hardly received a mention. One big transformation that we can achieve is in the area of asset securitisation, one of the triggers of the 2008 financial crisis.

In India, a perfect storm of Non Performing Assets (NPAs), Asset Liability Mismatch (ALM) and a related, but compounding, phenomenon of non-deposit taking entities (most NBFCs) getting a larger share of the credit market has resulted in the need for a fresh look at the need for capital of lending institutions. It has been an issue that both, Government and RBI, have been trying to address through various steps. RBI has also set-up a committee for the development of housing finance securitisation.

“Securitisation market records 50% growth in Q1” reads an Economic Times headline quoting an ICRA report. What is even more interesting is that the growth in Pass-Through Certificates is 95% (Direct Assignments growing at 32%). This is on the back of a 100% growth in FY 19, making India, arguably, the fastest growing securitisation market in the world.

Still, at a projected INR 200 Lakh Cr ($29 Bn), India’s securitisation market is one-eightieth (1/80) the size of the US market, making India a rather nascent market given that the size of its economy is about one-eight (1/8) that of the US.

If you think of securitisation simply as a risk-mitigated means to funding, say, someone’s home loan through someone else’s pension investments, it makes sense beyond short term triggers like GST rates and holding periods etc. But given all the issues we have faced, just linking the two words ‘loan’ and ‘pensions’ sounds…

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