Structured Finance through Collateral Management

P V AnanthakrishnanP V AnanthakrishnanExecutive Vice President &Head, Commodity Business

Structured Finance An art of transferring the risks from

parties less able to bear them to those more equipped to bear them.

Move the risk away from the party which is being financed

Conversion of Wealth to Capital Plantations, Oil etc

Why Structured Finance

Traditional Bank Finance Primary Risk on Borrower Financials of borrower – Key element Other Collateral – Secondary

Borrower can’t optimize their working capital requirements

High interest due to higher risk Financing to new Companies

Structured Commodity Finance

Primary risk on underlying commodity Storage/Control of commodity

With neutral party Borrower Profile/Financials

Secondary comfort

Structured Commodity FinanceFacilitators…

Warehousing Infrastructure Logistics Management Quality Assaying Insurance Exit Options

Collateral Management

Essential component of effective credit risk management

One of the method of securing the loan with physical commodity

Process comprises of Bank, Borrower & Collateral Manager

Collateral Manager must enjoy fiduciary trust of Borrower & Bank

Warehouse Receipt Finance

Collateral Manager

Warehouse

BankBorrower

Disbursement of loan

Control

Commodity

Quality TestingQuantity CheckingLogistics

Acceptance for storage

Issue of receipt

Regular monitoring

Procurement

AcceptabilityOf Warehouse

Lien marking

Tripartite agreement

Service Provider

WarehouseService Provider

Farmer CommodityCollateralManager

Bank

MobilizesBusiness

LogisticsMgnt

QualityCheck

Control &Monitor

Warehouse ReceiptWith lien markingDisbursement

thru SP

Deposit of Commodities

Import Trade

Collateral Manager

OverseasSupplier

Indian Buyer Bank

PurchaseContract

TripartiteAgreement

LC facility

CommodityAs per

LC Terms

Warehouse

Shipment

PledgeTo Bank

Repayment

PledgeRelease

Monitoring & supervision

Clearance & logistics

Export Trade

Collateral Manager

OverseasBuyer

Indian Supplier

Bank

SaleContract

TripartiteAgreement

LC facility CommodityAs per

LC Terms

WarehousePledgeOf commodityRepayment through

LC payments

Shipment

Release ofpledge

Logistics

Collateral Management

“Collateral Management enables the lenders to set up operational risk parameters while lending and also to control and monitor these parameters”

Our Experience

Structured Financing Bulk Financing Service Provider

About 50 Commodities Over 500 locations

Challenges

Financial Soundness of Collateral Manager

Integrated Solutions Quality Storage Capacity Comprehensive Insurance Cover Uniform laws covering multiple acts /

licensing requirements Vibrant Futures Market

Thanks