Structured Finance through Collateral Management

P V Ananthakrishnan Executive Vice President & Head, Commodity Business

Structured Finance
An art of transferring the risks from parties less able to bear them to those more equipped to bear them. Move the risk away from the party which is being financed Conversion of Wealth to Capital
Plantations, Oil etc

Why Structured Finance

Traditional Bank Finance
Primary Risk on Borrower Financials of borrower Key element Other Collateral Secondary

Borrower cant optimize their working capital requirements High interest due to higher risk Financing to new Companies

Structured Commodity Finance

Primary risk on underlying commodity Storage/Control of commodity
With neutral party

Borrower Profile/Financials
Secondary comfort

Structured Commodity Finance Facilitators

Warehousing Infrastructure Logistics Management Quality Assaying Insurance Exit Options

Collateral Management
Essential component of effective credit risk management One of the method of securing the loan with physical commodity Process comprises of Bank, Borrower & Collateral Manager Collateral Manager must enjoy fiduciary trust of Borrower & Bank

Warehouse Receipt Finance

Disbursement of loan Borrower Procurement Tripartite agreement Collateral Manager Control Commodity Quality Testing Quantity Checking Logistics Warehouse Acceptability Of Warehouse Bank

Lien marking

Acceptance for storage Issue of receipt Regular monitoring

Service Provider
Disbursement thru SP Service Provider Mobilizes Business Logistics Mgnt Quality Check Bank Warehouse Receipt With lien marking Warehouse Deposit of Commodities Control & Monitor Collateral Manager

Farmer

Commodity

Import Trade
Monitoring & supervision Overseas Supplier Purchase Contract LC facility Collateral Manager Clearance & logistics Pledge To Bank Pledge Release

Commodity As per LC Terms

Shipment

Indian Buyer

Tripartite Agreement Repayment

Bank

Warehouse

Export Trade
Overseas Buyer Collateral Manager Sale Contract LC facility Logistics Commodity As per LC Terms Bank Release of pledge Shipment

Indian Supplier

Tripartite Agreement

Pledge Of commodity Warehouse

Repayment through LC payments

Collateral Management
Collateral Management enables the lenders to set up operational risk parameters while lending and also to control and monitor these parameters

Our Experience
Structured Financing
Bulk Financing Service Provider

About 50 Commodities Over 500 locations

Challenges
Financial Soundness of Collateral Manager Integrated Solutions Quality Storage Capacity Comprehensive Insurance Cover Uniform laws covering multiple acts / licensing requirements Vibrant Futures Market

Thanks