under : for originators i. securitisation frees up an originator ’ s capital by removing the assets from the balance sheet. this way, capital is now available for origination of fresh assets with profitability potential. ii. through securitisation, an originator with a relatively lower credit rating but with better rated cash flow would be able to borrow / raise funds against such higher rated cash flows at cheaper cost. iii. it improves the liquidity position of the originator as the future receivables are replaced by cash. bis central bankers ’ speeches iv. securitisation can be used as a potent tool for re - balancing and re - distributing risks such as credit, market or liquidity risk or risk concentrations on the balance sheet of the originator. for investors for the investing parties, securitisation offers different set of benefits. i. it provides another option for diversifying their debt portfolio. ii. it facilitates participation in relatively lower or higher risk portion of the cash flows, as per their own risk appetite. iii. high rated and credit enhanced securities add to the safety of investments as well as capital savings for the investors. iv. the presence of the “ pool servicer ” provides certain additional assurance and safety. v. securitisation allows flexibility in structuring the timing of cash flows to one ’ s needs. for servicers, trustees, credit rating agencies and brokers securitisation offers added business opportunities and increased fee income. for financial markets securitisation provides alternate debt instruments in the financial markets and improves market liquidity. it widens the markets and allow entry to new players. it enhances return on capital, diversifies financial markets, and serves as an alternate route of funding. securitisation diversifies credit markets as it breaks the process of lending and funding into several discrete steps, leading to specialisation and economies of scale. securitisation improves efficiencies in financial markets through risk diversification as the risks can be bundled and hived off and distributed among counterparties better equipped to manage these risks. regulation of securitisation – global initiatives 6. securitisation emerged in the developed nations in 1970s as a financial innovation. the regulatory ethos of those days let the innovation thrive with least regulations. however, the lessons from the great financial crisis of 2008 activated a number of initiatives by the international standard setting bodies, regulators and governments for re - building investor confidence

also, some of the entities that become payments banks may be very well suited to support or substitute commercial banks in reaching remote areas. in sum then, we can increase competition in the banking sector while, at the same time, strengthening banks by reducing the burden of obligations on them. in this way, they will be able to contribute to sustainable growth even after the breakdown of the first grand bargain. freeing public sector banks to compete let us turn next to the public sector banks. there are well - managed public sector banks across the world and even in india today. so privatization is not necessary to improve the competitiveness of the public sector. but a change in governance, management, and operational and compensation flexibility are almost surely needed in india to improve the functioning of most psbs, as the dr. p. j. nayak committee has just reiterated. a number of eminently practicable suggestions have been made to reform psbs, such as creating a holding company to hold government psb shares, increasing the length of psb ceo tenures, breaking up the position of chairman and ceo, bringing more independent professionals on bank boards and empowering boards with the task of selecting the ceo, becoming more selective in cases that are followed up for vigilance investigations. we need to examine all these ideas carefully, many of which will help give public sector banks the flexibility to compete in the new environment. let us remember that what is at stake is not just the tremendous amount of national value that is represented by public sector banks but future financing and investment in our economy. if public sector banks become competitive, and especially if they do so by distancing themselves from the influence of the government without sacrificing their “ public ” character, they will be able to raise money much more easily from the markets. indeed, the better performers will be able to raise more, unlike the current situation where the not so good performers have a greater call on the public purse. competition will improve efficiency. the second grand bargain will also become irrelevant. conclusion the banking sector is on the cusp of revolutionary change. in the next few years, i hope we will see a much more varied set of banking institutions using information and technology to their fullest, a healthy public sector banking system, distant from government influence but not from the public purpose, and a deep and liquid financial markets that will not only compete with, but also support, the banks. such a vision is not just a possibility, it is a necessity