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Que: Securitization refers to the process of converting illiquid assets, such as loans, mortgages, or receivables, into tradable securities. It involves pooling together a group of similar assets, packaging them, and selling them to investors in the form of asset-backed securities (ABS) or mortgage-backed securities (MBS). Benefits of Securitization from Originator’s Perspective are given below. Identified one disadvantage out of the advantages

A. The borrower can obtain fund at lower interest rates applicable to highly rated instrument and gain a pricing advantage.

B. The originator does not record the transaction as a liability on its balance sheet.

C. Securitization enables banks and financial institutions to meet regulatory capital adequacy norms by transferring assets and their associated risks off the balance sheet.

D. An important advantage of securitization is the flexibility to tailor the instrument to meet the investor’s risk and tenor appetite.

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