Explain the benefits of Securitization from the angle of originator.

Originator (entity which sells assets collectively to Special Purpose Vehicle) achieves the following benefits from securitization. (i) Off- Balance Sheet Financing: When loan/receivables are securitized it releases a portion of capital tied up in these assets resulting in off Balance Sheet financing leading to improved liquidity position which helps in expanding the business of the company. (ii) More specialization in main business: By transferring the assets the entity could concentrate more on core business as servicing of loan is transferred to SPV. Further, in case of non-recourse arrangement even the burden of default is shifted. (iii) Helps to improve financial ratios: Especially in case of Financial Institutions and Banks, it helps to manage Capital -To-Weighted Asset Ratio effectively. (iv) Reduced borrowing Cost: Since securitized papers are rated due to credit enhancement and hence, they can be issued at reduced interest rate due to which the originator earns a spread, resulting in reduced cost of borrowings.