Structured Finance through
Collateral Management
P V Ananthakrishnan
Executive 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 Finance
Facilitators…





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
Disbursement of loan
Borrower
Procurement
Tripartite agreement
Collateral Manager
Bank
Lien marking
Control
Commodity
Quality Testing
Quantity Checking
Logistics
Warehouse
Acceptance for storage
Issue of receipt
Regular monitoring
Acceptability
Of Warehouse
Service Provider
Disbursement
thru SP
Bank
Warehouse Receipt
With lien marking
Warehouse
Service
Provider
Deposit of
Commodities
Mobilizes
Business
Farmer
Control &
Monitor
Commodity
Logistics
Mgnt
Quality
Check
Collateral
Manager
Import Trade
Monitoring & supervision
Overseas
Supplier
Purchase
Contract
LC facility
Indian
Buyer
Commodity
As per
LC Terms
Collateral
Manager
Tripartite
Agreement
Repayment
Clearance &
logistics
Bank
Pledge
To Bank
Pledge
Release
Shipment
Warehouse
Export Trade
Overseas
Buyer
Shipment
Collateral
Manager
Sale
Contract
LC facility
Indian
Supplier
Tripartite
Agreement
Logistics
Commodity
As per
LC Terms
Bank
Release of
pledge
Pledge
Of commodity Warehouse
Repayment through
LC payments
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