Blockchain Technology in Securitization in India

Blockchain Technology in Securitization in India

Anirudh Menon (Center for Management Studies, Jain University (Deemed), India), Dikshant Khandelwal (Center for Management Studies, Jain University (Deemed), India), Kailash Multanmal Suthar (Center for Management Studies, Jain University (Deemed), India), and Sunitha B. K. (Center for Management Studies, Jain University (Deemed), India)
DOI: 10.4018/978-1-7998-6643-5.ch019
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Blockchain and securitization's benefits go beyond the benefits of loan originating, underwriting, rating assignment and reviews, loan servicing, smart contracts, secondary market trading. This research is based on the qualitative data collected from external sources. The focus is on using secondary data from over 30 research papers, articles, and professional experiments that have been taken into account, and the formulas and conditions gathered from them have been experimented with the Indian economic scenario. The understanding is that securitization has always been a challenge in a country like India, but with the wide range of benefits from the ‘blockchain', it can help improve the challenges and ensure a wider scope of securitization in a country like India, emphasizing that blockchain gives an elevated level of information security which brings about lower ingenuity trouble and disposes of administrative failures from the cycle of securitization.
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Blockchain And Securitization

Blockchain will bring vital changes within the potency, security, and transparency to several of the monetary sector’s activities. The innovation's capability to disembarrass procedures, lower prices, speed up exchanges, improve transparency, and brace security may impact all members within the securitization lifecycle—from originators, supports/guarantors, and servicers to rating offices, trustees, monetary specialists, and even controllers. Blockchain and securitization, their road ahead goes beyond the benefits of loan originating, underwriting, rating assignment and reviews, loan servicing, smart contracts, secondary market trading. Tracking financial assets on a blockchain can diminish dependence using credit card rating organizations and empower financial specialists to follow all the more intently the presentation of benefits and figure related hazards. This should expand certainty for speculators and increment enthusiasm for the optional market. By giving an elevated level of data security blockchain also can lower the due diligence burden and take away regulative inefficiencies from the securitization method. Blockchain, through its disintermediation and synchronic recording of data across the system, will just about eliminate time lags in data and payment flows throughout the securitization method, as well as within the secondary market. This increase in speed and certainty may considerably scale back counterparty risk, unleash capital, and scale back the come thresholds that investors demand. Blockchain’s capability to extend the safety of transactions and knowledge and mitigate fraud may be appealing to the securitization trade, wherever integrity of knowledge is overriding. The speed during which blockchain technology will record transactions may additionally scale back efficiencies with reference to commerce and conjugation safety (Siddhartha, 2019).

Numerous budgetary organizations have begun attempting to apply blockchain innovation into monetary exchanges so as to diminish exchange expenses and increment operational efficiencies, particularly in money related note, cross-outskirt instalment and resource sponsored securitization. It tends to be seen that blockchain innovation can usually have application potentialities in cash connected fields presently (Conway, 2020).

Key Terms in this Chapter

Data Security: Data Security is a process of protecting files, databases, and accounts on a network by adopting a set of controls, applications, and techniques that identify the relative importance of different datasets, their sensitivity, regulatory compliance requirements and then applying appropriate protections to secure those resources.

Cryptocurrency: A digital currency in which transactions are verified and records maintained by a decentralized system using cryptography, rather than by a centralized authority.

Data Tampering: Data tampering is the act of deliberately modifying (destroying, manipulating, or editing) data through unauthorized channels.

Counterparty Risk: Counterparty risk is the likelihood or probability that one of those involved in a transaction might default on its contractual obligation. Counterparty risk can exist in credit, investment, and trading transactions.

Distributed Ledger Technology: Distributed ledger technology (DLT) is a digital system for recording the transaction of assets in which the transactions and their details are recorded in multiple places at the same time.

Asset-Backed Security: An asset-backed security (ABS) is an investment security—a bond or note—which is collateralized by a pool of assets, such as loans, leases, credit card debt, royalties, or receivables.

Smart Contracts: A smart contract is a self-executing contract with the terms of the agreement between buyer and seller being directly written into lines of code. The code and the agreements contained therein exist across a distributed, decentralized blockchain network. The code controls the execution, and transactions are trackable and irreversible.

Data Transparency: The ability to easily access and work with data no matter where they are located or what application created them.

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