Article Details
  • Published Online:
    July  2024
  • Product Name:
    The IUP Journal of Accounting Research & Audit Practices
  • Product Type:
    Article
  • Product Code:
  • Author Name:
    Reena Rani , Abhineet Saxena , Rahul Agarwal and James Kanda
  • Availability:
    YES
  • Subject/Domain:
    Finance
  • Download Format:
    PDF
  • Pages:
    13
Volume 23, Issue 3, July 2024
Impact of Securitization on Bank Performance: A Panel Data Analysis of Private and Foreign Banks in India
Abstract

Indian banks are continuously facing fund scarcity in meeting loan requirements. They have fewer deposits in comparison to the loan demands, which has led to a decrease in the liquidity of banks and nonbanking institutions. To get rid of this problem, banks use several conventional methods, and securitization is one of them. Securitization is known as the construction of security in any financial transaction. The paper seeks to find out whether securitization process can positively impact Indian banking industry, using selected bank performance parameters. The paper first presents the impact of securitization on banks’ performance; then it depicts the hurdles to the growth of securitization in the country

Introduction

The most persistent issue for banks is funding, as some banks in developing countries continue to follow traditional lending practices such as keeping loans on their balance sheet until they mature and monitoring borrowers’ performance (Altunbas et al., 2014). Nonperforming loans have raised concern among the top authorities and banking regulators as it slowly results in a decrease in stock prices and profitability loss, which results in a distressing situation. Securitization is a tool introduced to manage NPL on the balance sheet (Miglionico, 2019). Securitization is an American invention. Mortgage, credit card, computer lease, auto loans, and asset-backed and life insurance securitization are the various forms of securitization (Chakraborty, 2013).