Credit rating agency Crisil has estimated that the securitisation potential of Indian banking system is about Rs 60,000 crore (Rs 600 billion).

"Even if 10 per cent of performing term loans and investments in non-government securities and 20 per cent of non-performing assets are securitised, potential volume for securitisation in Indian banking sector would amount to a huge Rs 47,500 crore (Rs 475 billion)", Crisil executive director and chief rating officer Roopa Kudva said in a statement.

Add to this the securitisation volumes expected from newer asset classes like credit card receivables, housing and car loan portfolios and total securitisation potential from the banking system could exceed Rs 60,000 crore (Rs 600 billion), she said.

The statement said as on March 31 2002, scheduled commercial banks in India had term loans of Rs 2,70,400 crore (Rs 2704 billion) with investments in securities (excluding government securities) of Rs 1,30,500 crore (Rs 1305 billion). The gross non-performing assets were reported to be Rs 70.9 crore (Rs 709 million).

Crisil estimates that banks could securitise housing, car and employee loans amounting to Rs 12,600 crore (Rs 126 billion) while that for securitising credit card receivables is expected to be about Rs 1,800 crore (Rs 18 billion).

The recently promulgated Securitisation Act will provide a fillip for securitising NPAs and Crisil expects it to address the need for a viable legal framework for securitisation and asset reconstruction, director financial sector ratings G V Mani said.

The act can help banks unlock capital, facilitate profit and loss and balance sheet management, Mani added.