Asset-Backed Securities (ABS) are financial instruments created through securitisation — a process in which a financial institution pools a large number of similar, relatively illiquid financial assets (such as auto loans, consumer loans, credit card receivables, home equity loans, or microfinance receivables) and transfers them to a Special Purpose Vehicle (SPV), which then issues tradeable securities backed by the cash flows generated from those underlying assets to investors. ABS allow originators (such as banks, NBFCs, or auto finance companies) to convert illiquid loan portfolios into liquid tradeable instruments, freeing up capital for fresh lending. Investors in ABS receive periodic principal and interest payments derived from the underlying loan repayments. In India, SEBI regulates the securitisation market and ABS issuance. For fixed income investors and analysts on Ventura Securities, ABS offer a higher-yielding alternative to vanilla corporate bonds, but require careful assessment of the credit quality of the underlying loan pool, the structure of credit enhancement mechanisms, and prepayment risk.
For android only
