Eight microfinance institutions (MFIs) that will soon turn into small finance banks (SFBs) may have to rely on securitization for freeing up capital to cater to fresh loan demand as they begin to meet a new set of rules by the Reserve Bank of India (RBI).
Securitization is a process through which a lender can bundle loans together and sell them to another financial institution, thereby transferring the risk of the loan to the buyer. The aim is to free up capital.
Securitization is done either through direct assignment of loans or through pass-through certificates (PTC) which have loans as underlying. These are tradable instruments.
For more on this story visit the following link: MFIs may turn to securitization during their transit to small finance banks
Source: Live Mint