Indian banks are currently on an overseas borrowing binge (ICICI Bank & SBI plan to raise $5 billion and $2 billion respectively along with some others) just to meet the current credit requirements, let alone the Basel II capital requirement norms. No doubts, Public Sector Banks (PSBs) are also suffering from shortage of capital – closed shareholding of PSBs being one reason for the same. Hence, while a further dilution of the government’s stake in PSBs is a no-brainer, what is more important is that this move will pressurise the RBI to revisit its ownership policy and perhaps even encourage an amendment to the Banking Regulation Act.
In the meanwhile, what options can RBI utilise for helping banks tide over the current crises. The answer is simple: Securitisation of existing bank advances. Not only will securitisation help in assetliability matching and risk mitigation, it will also allow banks to diversify their asset portfolio, reduce capital requirements and gain access to more cost-effective funding (80 basis points cheaper than wholesale deposits). Ramraj Pai, Director, Structured Finance Ratings, CRISIL says, “Banks could make a beginning by securitizing the highly rated single loans, which could release capital to the extent of 9% or more of the loan... Securitisation (could be) used from a funding perspective.”
For banks, the implementation of Basel II Capital Accord will surely continue be an impossible challenge until the RBI acts as a facilitator rather than as any gregarious procrastinator.
For Complete IIPM Article, Click on IIPM Article
Source : IIPM Editorial, 2006
An IIPM and Management Guru Prof. Arindam Chaudhuri's Initiative
Read more:-
· My Blog
· IIPM News
· IIPM : IIPM Links
· IIPM: More about IIPM
· IIPM Alliances - IIPM - by RAVIIIPM PUBLICATION
In the meanwhile, what options can RBI utilise for helping banks tide over the current crises. The answer is simple: Securitisation of existing bank advances. Not only will securitisation help in assetliability matching and risk mitigation, it will also allow banks to diversify their asset portfolio, reduce capital requirements and gain access to more cost-effective funding (80 basis points cheaper than wholesale deposits). Ramraj Pai, Director, Structured Finance Ratings, CRISIL says, “Banks could make a beginning by securitizing the highly rated single loans, which could release capital to the extent of 9% or more of the loan... Securitisation (could be) used from a funding perspective.”
For banks, the implementation of Basel II Capital Accord will surely continue be an impossible challenge until the RBI acts as a facilitator rather than as any gregarious procrastinator.
For Complete IIPM Article, Click on IIPM Article
Source : IIPM Editorial, 2006
An IIPM and Management Guru Prof. Arindam Chaudhuri's Initiative
Read more:-
· My Blog
· IIPM News
· IIPM : IIPM Links
· IIPM: More about IIPM
· IIPM Alliances - IIPM - by RAVIIIPM PUBLICATION
