At the global level, securitization is becoming more popular among financial institutions . Securitization is meant to avoid disparity between assets and liabilities of banks /Financial Institutions (FIs). In order to promote securitization in India, RBI has constituted a working group on asset securitization. This article discusses the importance of asset securitization for Indian banks , financial institutions and long-term project financing. It also looks at the main problems associated with securitization in the Indian context.

Securitization is a process in which a group of individual's homogeneous loans are enclosed and disseminated to many investors having funds in the form of coupons, Pass/Pay-through Certificates (PTCs), or through Special Purpose Vehicles (SPVs), with the feasibility that the inflow of sources would be distributed pro rata to coupon holders. It is an amendment of present or future cash flows into transferable securities that can be sold to investors. This leads to creation of financial tools that show interest in possession or are guaranteed by an ideal or at times, even varied pool of assets. These assets are generally vehicle loans, mortgage loans, credit card receivables or even trade receivables.

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