##uritisation ( abs ) is the largest securitisation class in india, driven by retail loan portfolio of banks. nbfcs like the asset finance companies ( afc ) operating in the sme and transport financing segments and micro finance institutions ( mfi ) are very active as originators. though the market had begun since the year 2000, the gfc obviously has its repercussions in indian market as well. it is reported that the indian securitisation market which reached a high of ₹ 63, 730 crore by march 2008 dwindled down to ₹ 28, 800 crore in by march 2014. 22. the micro finance companies play a larger role mainly due to their psl underlying pools. another positive development witnessed in recent years is the preference for multiple tranche products as against single tranche structures. another encouraging factor is the preference for the lower rated senior tranches by the investors. it is reported that during the financial year 2014, the number of aaa ratings at initiation dropped from 45 % in 2012 to 26 %. 23. insurance, pension and mutual funds can play an important role in the indian securitisation market as they can invest long term and at the same time have the risk appetite, capacity and expertise for taking exposures to the lower tranches. however, the pension funds are not allowed to invest in securitisation ptcs and insurance companies are allowed to invest in high investment grade aaa securities only. mfs are still hesitant to invest in the securitised papers due to past pending court cases as well as lack of clarity on the tax implications for their investments. in the finance bill 2013, mutual funds were exempted from application of the distribution tax imposed on securitisation spv ’ s. low appetite for securitisation in indian financial market 24. the appetite for securitisation in india has been on the lower side ; it is used largely to meet priority sector lending targets by banks as investors, nbfcs being the originators. this low appetite can be ascribed to several factors, including legal, taxation and stamp duty issues. 25. recently, we undertook an informal and quick survey of the securitisation market in india. the primary objective was to assess the issues facing the market along with the reasons for poor take off in securitisation as a risk transfer and liquidity enhancing product. the sample survey included originators, investors, third party liquidity and credit enhancement providers, servicers

economies. interest rates were brought down to very low levels in most developed countries and fiscal deficits widened. however, these measures were unable to prevent some major corporate defaults. although this exerted pressure on the world financial system, institutions were generally able to cope with the situation. japanese banks were affected by bad debts and low profits and some banks in europe also encountered problems. insurance companies and pension funds fared worse than banks. of further concern is the volatility experienced in exchange rates and its effect not only on the financial sector, but also on real economic activity. in particular, the us dollar has weakened substantially, which could have major repercussions for the world economy. domestic economic developments the weakness of the us dollar was a major factor in a significant recovery in the external value of the rand. having declined by 34 per cent on a trade - weighted basis during 2001, the nominal effective exchange rate of the rand recovered by 24 per cent in 2002 and by a further 12 per cent up to the end of july 2003. the performance of the rand was also related to south africa ’ s inherent economic strength and to the sound and consistent macroeconomic policies pursued by the authorities. improved international perceptions of these strong fundamentals were reflected in a significant narrowing in spreads on internationally - traded south african bonds, and was recognised by higher ratings of the country by two major international rating agencies, which further underpinned the rand ’ s recovery. the positive sentiment in the market was supported by attractive domestic interest rates and an increase in the country ’ s terms of trade. similarly, the real effective exchange rate of the rand recovered markedly since the beginning of 2002. this index, which reflects the trade - weighted exchange rate of the rand deflated by the production price differential between south africa and its main trading partners and competitor countries, rose by an estimated 16 per cent over the eighteen - month period up to the end of june 2003. even after this increase the level of the real effective exchange rate of the rand was still below the index values of early 2000, i. e. before the currency market turbulence. this indicates that south african producers are fairly price competitive, but the profitability of their international transactions has, of course, fluctuated considerably over the past three years. domestic output could not escape the impact of the still subdued global economy. growth in real gross domestic product slowed down from 3½ per cent in the first half of 2002 to 3 per cent in the second half and 1½ per cent