The State Bank of India (SBI) is considering securitisation as an option to reduce its asset-liability mismatch risk. While the securitisation policy is still at the draft stage, sources in SBI say the bank is essentially looking at reducing the average maturity of its asset portfolio.
Sources in SBI Capital Markets, which is playing the advisory role in the formulation of the policy, say that the bank is not comfortable with asset exposures of over five year maturity. This includes SBI's exposure to both investments and advances.
The idea is to hive off a large part of the bank's exposure in assets of over five year maturity and lap up assets at the shorter end. The funds mobilised through asset securitisation will be deployed in investments with maturities between 45 days and five years. Sources say SBI Caps will also be employed to find buyers for the hived-off long-term assets.Investment analysts say that inflow-outflow mismatches for the State Bank are mainly coming from the investment side where the bank has a large exposure in long-term government paper.
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"Given the size of SBI's investments compared to the market demand, and also the additional supplies coming from the Reserve Bank of India, the mis-match risk is imminent" says a banking analyst.
According to a senior SBI official, since the bank already has excess loanable funds through a 18 per cent growth (year-on-year) in deposits, securitisation has not been looked at as a fund mobilisation option.
The official adds that it would not be possible to strengthen SBI's balance sheet by offloading bad quality assets through the securitisation route and use it in better investments.
SBI Cap officials are hopeful that the bank will be able to finalise its policy by December. Presently, SBI is consulting legal experts and solicitors on issues relating to stamp dues, taxation and creation of a special purpose vehicle.