Securitisation and Structured Finance

Securitisation, per se is a transaction in "instruments", which represents cluster of assets / receivables of identical nature, having steady flow of income, thereby giving greater liquidity to the instrument representing it. Historically, it has been developed as a "mechanism", to club smaller stream of incomes, regular and steady in nature and represent it through "instrument(s)", which then could be placed in the market either for public at large or to institutions, to raise funds at a higher level.

Securitisation is primarily a "structured finance instrument" that balances the risk-return needs of the investors. Therefore, the terms ‘securitisation’ and ‘structured finance’ are almost used interchangeably in practice. Securitisation as commercial activity has already attained maturity in markets like the US, the UK and several other European countries. However, in Indian market, where experimentation with different philosophies of economic theories and mechanism for the market