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Please explain the system for creating new securities based on financial assets held by FIs

Please explain the system for creating new securities based on financial assets held by FIs

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Securitization refers to process where FIs on based on the financial asset held by it issues new security. Let us understand this concept using an example

Mr A, B and C takes loan from bank, now for bank it is financial asset, now the bank in order to realise it's money will pool the loan and formed a group of loan and will sell it to financial institution, Now financial institution has right to collect interest from MR A , B and C. Now loan amount and interest on in that is receivable fors part of financial asset held by FI. The FI can on basis of this loan can issue securities that can be traded in the market, thus realising cash quickly. This whole process is called securitization

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