Already have an account? Get multiple benefits of using own account!
Login in your account..!
Remember me
Don't have an account? Create your account in less than a minutes,
Forgot password? how can I recover my password now!
Enter right registered email to receive password!
Process
The process of Securitization involves the following steps:
Transfer of assets by the originator (person holding the assets) to an entity (company or a trust) specially created for the purpose called Special Purpose Vehicle (SPV). Special Purpose Vehicle is a separate entity formed exclusively for charting this deal and providing funds to the originator. The SPV may be formed as a company under the Companies Act or a trust under the Indian Trusts Act.
The assets transferred should preferably be homogenous in nature in terms of the risk attached to them and/or maturity such that the pooling of such assets would be convenient. SPV divides this pool of assets transferred by the originator into marketable securities called Pay or Pass-Through Certificates and resells them to various investors.
Investors may either be banks, mutual funds or state or the central government. The investor may even be the parent company or the financier of the originator.
The issue of securities is managed by a merchant banker, who may underwrite the whole issue, or a syndicate of merchant bankers. The originator continues to administer the loan portfolio for some fee and he passes the collections to the trust which services the securities.
Apart from the SPV, a trustee is normally appointed to oversee the process of securitization. An escrow account is created for the purpose of distributing the receivables to the investors in the deal. The trustee maintains such an escrow account.
Figure
In India, mutual funds are allowed to invest not more than 5% of their total corpus in the securitized instruments. Also, unlike in the West, insurance companies are not allowed to invest in securitization deals. This, however, is expected to be relaxed with the entry of private insurance players.
Theoretically, any resource with predictable cash flows can be securitized:
Future rentals of a fishing boat.
Remuneration that is paid to a movie star.
Bills that are made to a five-star hotel.
Tickets that are to be sold at a cinema hall.
Future billings for an airline.
Dues that have to be paid by the state electricity boards to the power generating companies.
Credit card receivables.
Loans that are to be paid to the housing finance company.
Mortgages in lieu of future payment.
Hire purchase receivables.
Non-performing assets of a financial entity.
Question 1: You hold a diversified portfolio consisting of a Rs.5,000 investment in each of 20 different common stocks. The portfolio beta is equal to 1.15. You have decided t
What are "in-market" mergers? A: An in-market merger is one that occurs between two banks operating in similar geographic area, usually a city or metropolitan area. The merged in
A callable bond is the sale of a call option by the investor to the issuer as it allows the issuer to repurchase the bond from the time it becomes callable until
The financial manager of A ltd.co. expects that its EBIT in the current year is 10,000. The firm has 5% Deb. Amounting to Rs. 40,000., while 10% Pref. Share amounts to Rs. 20,000.
I need a report on the topic Factors affecting Composition of Working Capital. Can you please assist me?
They are issued in the local market, by a foreign borrower are usually denominated in the local currency. For example, Yankee bonds are USD denominated bon
Explain how using a risk-adjusted discount rate improves capital budgeting decision making compared to using a single discount rate for all projects? The risk-adjusted discount
one page paper reviewing "the Morgan Stanley Oil and Gas Report"
Explain the adjustments necessary to translate enterprise value to the total present value of common equity. To gain the value of the company's common stock add the value of th
How is a country’s economic well-being enhanced through free international trade in goods and services? As per to David Ricardo, with free international trade, it is mutually adv
Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!
whatsapp: +91-977-207-8620
Phone: +91-977-207-8620
Email: [email protected]
All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd