New
Delhi:
The Indian President has promulgated an ordinance on securitisation
and reconstruction of financial assets and enforcement
of security interest.
The union cabinet had
earlier approved it on 18 June 2002. The ordinance will help banks
and financial institutions (FIs) treat their financial assets in
three ways.
Firstly, it will help
banks and FIs turn their assets into securities, which could be
traded in the market in smaller bundles. This would bring
immediate liquidity, which can be lent, instead of waiting for
loans to be realised.
The
new law will also help FIs in setting up asset reconstruction
companies to recover their bad assets. And finally, it
will help FIs in
the enforcement of security interest (the right to the
security in case of default by the client).
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