IDBI Bank is planning to securitise part of its infrastructure loan portfolio to release resources and capital.
The size of the portfolio that the public sector bank may securitise could be about Rs 1,000 crore. A senior IDBI official said, “While the bank has been trading in securitised paper, it has never securitised loans originated by it. Now we are looking at securitising advances in our own portfolio. However, the activity is at a nascent stage.”
“Besides releasing resources, securitisation will create room to take additional exposure to a particular sector, say power. It would also release capital which has to be set aside in line prudential norm,” the official said.
IDBI has a sizable portfolio of infrastructure credit, thanks to a legacy of being a development finance institution. Most of these have been running smoothly and provide a stable cash flow.
The size of infrastructure loans is large and the bank is reaching exposure limit to some of the sectors. The Planning Commission has estimated an infrastructure investment outlay of $500 billion for the five-year plan ending 2012. Financial institutions and banks have access to limited amount of long-term resources, which could be used for funding infrastructure projects.
Securitisation helps to transform loans to tradable debt securities. It helps financial institutions to not only address the exposure norm constraints, but also distribute risks more efficiently even among those who do not have the skills to appraise them.
The Committee on Infrastructure Financing headed by Deepak Parekh had in 2007 recommended that India Infrastructure Finance Corporation (IIFCL) should be allowed to invest at least in the senior tranches of securitised papers relating to infrastructure companies. It could potentially large investor in securitised paper.
A senior executive with Infrastructure Leasing & Finance Services said the activity in Indian securitisation market is low and securitized paper is backed by consumer loans, home loans and auto loans.
