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Debt Securitization Debt securitization is loan which is given from financial institution to borrowers.

But
this debt of loan is given in the form of security or marketable instrument. In other words, Debt securitization is a process of transformation of receivables into security which may be traded latter in the open market. Suppose, A gives loan to B. Loan is an Fixed asset for A and it is fixed liability of B. Now, B gives loan to C. But this loan is given in the form of marketable instrument. Now, it is current asset of B. We can see lots of car loan account in any financial company. Parties in Debt Securitization ORIGINATOR SPECIAL PURPOSE VEHICLE QUALIFIED INSTITUTIONAL BUYERS ORIGINATOR: This is the main organisation. It gives loan in the form of loan not in the form of debt
securitization.

In this party, we can include RBI or SBI. Qualified Institutional Buyers: A qualified institutional buyer is a purchaser of marketable
securities, that is deemed financially sophisticated and is legally recognized by security market regulators.

SPV advertises for his debt securitization product. But they did not sell to all. SPV sells to those who clear its condition. All these parties are called QIN. Suppose, SBI finds 10 SPV and gave loan of Rs. 200 Crores. Now, 10 SPV converts this Rs. 200 crore loan in the form of debt securitization and sells to different qualified buyers. These buyers may be 1000 or 100000. One of the best benefits of debt securitization is to reduce risk. If SBI gives Rs. 200 crores to one party. It may be risky. But to give 10 SPV is less risky. For SPV, market instruments are also less risky to give 100000 persons. SPECIAL PURPOSE VEHICLE: Special Purpose vehicle are that party who gets loan or pool of loan
from originator and convert it into marketable securities. After converting it in marketable securities or papers, it will become debt securitized. Now, SPV will sell it in the money or any other financial market.

These parties include private banks and other private financial institution which you can find their office in your local city. Advantages of Debt Securitization Standardization Diversification Flexibility Disadvantages of Debt Securitization The synchronization of the interest generated by the pool and the interest paid to the investors is a very arduous and tedious process. The transfer of mortgages may be difficult for legal, regulatory or tax reasons. It means that such transactions have to satisfy the requirements of regulatory authorities. The complexity of the transaction requires a very highly sophisticated documentation, and is very time consuming and costly process