” mean coming together of two entities with a common purpose,whereas “
mean keeping together of these two entities. For example, when a bank provides a loan of a sum of money to a user, the transaction leads to a relationship:that of a lender and a borrower. However, the relationship is terminated when the loan isconverted into a debenture. The relationship of being a debentureholder in the company isnow capable of acquisition and termination by transactions.
Meaning of securitisation:
" broadly implies every such process, which converts a financialrelation into a transaction. History of evolution of finance, and corporate law indicatewhere relations are converted into transactions. Contribution of corporate laws to theworld of finance, for example an ordinary share, which implies piece of ownership of thecompany, is amazing to note. Ownership of a company is a “
”, packaged as a
” by the creation of the ordinary share. This earliest instance of securitisation was instrumental in the growth of the corporate form of business andseparation of ownership and management of organizations is one of the greatestcommercial inventions of this 19
century. Similar to the role of ordinary share,securitisation has strong role to play in economy.Securitisation is defined as “ the process whereby loans, receivables and other financial assets are pooled together, with their cash flows or economic values redirectedto support payments on related securities”. These securities, some of which are referred toas “asset-backed securities” are issued and sold to investors principally, institutions in the public and private markets by or on behalf of issuers. The issuers use securitisation tofinance their business activities. The financial assets that support payments on asset- backed securities include residential and commercial mortgage loans, as well as a widevariety of non mortgage assets such as trade receivables, credit card balances, consumer loans, lease receivables, automobile loans, and other consumer and business receivables.Although these asset types are used in some of the more prevalent forms of asset based3