The Hindu Business Line : Stamp duty waiver for securitisation deals urged

SECURITISATION can become the future funding vehicle and substantially reduce non-performing assets (NPAs) of banks and financial institutions, estimated at over Rs1 lakh crore, to help them unlock their balance sheets.

But this is possible only if a mechanism is evolved to put in place an efficient financial accounting engineering for asset reconstruction companies.

In addition, all the state governments need to be persuaded to completely waive off stamp duty on securitisation transactions to make the concept popular at a national level.

These views emerged at a conference on `Securitisation: The Future Funding Vehicle,' organised by the Associated Chambers of Commerce and Industry (Assocham), in which the key speakers were the former Finance Secretary, Mr D.C. Gupta; the Acting CMD, Punjab & Sind Bank, Mr P. Subbarao; and the Assocham President, Mr Mahendra K. Sanghi.

Delivering the keynote address, Mr Gupta stressed the need for asset-based securitisation, arguing that 45 per cent of NPAs were a result of poor asset valuation.

He said if securitisation had to win acceptance in the debt market, the Central government would have to persuade the States to eliminate stamp duties. He drew distinctions between gross NPAs and net NPAs, saying the gross NPAs were around Rs Rs 65,000 crore by the end of 2004. Net NPAs, according to him, were restricted within the range of Rs 25,000 crore during the period.

Mr Gupta said the NPAs in agricultural sectors may not be recovered through securitisation, but if a mechanism is evolved and an efficient system put in place, the securitisation will go beyond auto and house ancillary to consumer financing.

In his presentation, Mr Subbarao called for policies that visualised the future of securitisation by assigning the specified role to bankers and merchant bankers.

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