Prakash ch Khatua

G.L.Bajaj
DEBT MANAGEMENT

Banks in India have become easily accessible for getting loans for use by individual’s i.e.
a. Personal loans for general credit needs.
b. Home loans for construction or purchase of house.
c. Education loan or Student loan given to meet the need of higher education.
d. Car loans for purchase of vehicles.
e. Corporate loans for other than individual needs.
The stages to the creation of a Debt are:
a. Identifying the borrower.
b. Identifying the needs of the borrower.
c. Design an appropriate loan structure.
d. Assessment /Inspection of the proposal.
e. Sanction & Disbursement.
f. Documentation
g. Pricing
h. Monitoring
i. Management of the debt/ Post disbursal supervision
j. Inspection & Recovery.
A successful completion of all the stages of the Debt as above noted is generically called
Debt Management. Any non-performing assets where the amount due or interest thereon
stand unpaid for more than one quarter, need recovery measures other that the routine
follow-up and inspection methods. The lender may opt to file a civil or a criminal suit
depending on the nature of transaction and the security involved. In cases where there
security backing , the Banks may prefer a Debt Securitization or Asset securitization in
which receivables are converted into marketable securities through restructuring or cash
flows generated from its underlying asset.
Debt Securitization
Securitization effort involves considerable investments in time and resources. It has
the following advantages:
1. It improves the balance sheet statistics.
2. It transfers the risk to Asset Backed securities.
3. It improves operating processes.
4. Improves operating leverages.
5. Reduces funding costs.
6. Reduces Asset – Liability mismatch.
7. Lower capital requirements.
8. Admissibility of future surplus flows into cash assets.
9. It increases liquidity.