According to experts gathered at a seminar on securitisation organised by ICICI here on Saturday, the potential of securitisation is immense, especially in the current context of uncertain economic situation.

"Securitisation will be the major financial instrument for the next decade," said ICICI chairman KV Kamat. He said that ICICI has already securitised about Rs 2,600 crore of its loans. "Financial institutions should not shy away from securitisation and our retail strength would come in handy in placing these securities," hesaid.

Reserve Bank of India chief general manager, internal debt management, Usha Thorat said that securitisation will add depth to the moribund debt markets and help in better asset-liability management. However, she stated that interest rates and transaction costs needed to come down.

Securitisation is currently very active in the US and Europe and is catching on in Japan and Latin America. Traditionally, existing receivables, where the receivables are not contingent upon any performance of the originator, were securitised. Apart from mortgages, such assets tended to be auto loans, credit card receivables, educational loan receivables, lease receivables and industrial receivables.

Simply stated, securitisation refers to conversion of cash flows into marketable securities. This is done through a process through which illiquid assets are packaged, converted into tradable securities and sold to third party investors.

Of late, however, `future flow securitisation' where the cash flows that would begenerated by the originator in future are securitised, is gaining momentum leading to the emergence of new and esoteric asset classes in the securitisation market. Remittances from overseas, international telephone settlements, export receivables, vacation home loans, music album sales etc are finding favour with investors.

Till now most of securitisation deals in India have involved cars and commercial vehicles hire-purchase receivables of non-banking finance companies (NBFCs). They include leading NBFCs like Tata Finance, SRF Finance, Birla Global Finance, Cholamandalam Finance, Overseas Sanmar and Ashok Leyland Finance among others. Citibank, State Bank of India, Bank of India, Unit Trust of India, Bank of India, ABN Amro, ANZ Grinlays Banks and Standard Chartered are some of the leading buyers of securitised assets.