Evaluating Securitization's Role in Enhancing Profitability and Liquidity: A Panel Data Perspective on Indian Financial Institutions

Abstract

Asset backed securitisation has emerged as a key financial instrument for improving liquidity and accessing alternative funding for financial institutions. The study investigates the role of securitisation in enhancing the profitability and liquidity of Indian Financial Institutions, employing a panel data approach. Analysing data from five prominent financial institutions in India, it examines how asset-backed securitisation influences financial performance indicators, the study examines how securitisation ratio influences key performance metrics, particularly on Return on Assets and Liquidity Ratio. Employing EViews for econometric analysis, the study replicates methodologies aligned with existing studies, revealing that while securitisation opens new funding channels, its effect on profitability varies, likely due to factors like Net Interest Margin and Non – Performing Loan Ratio. Findings reveal that while securitisation can provide immediate liquidity, its long-term effects depend on asset reinvestment strategies and regulatory structures. The results suggest that profitability gains may not be uniform across institutions, influenced by diverse operational costs and economic factors. The research thus offers valuable insights for policymakers regarding the complex role of securitisation in promoting financial stability within emerging markets.