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.
Cash flow statement: The cash flow statement summarises the flow of cash into and out of the business over a certain period of time. The cash flow statement measures the liq
What is Walter Model? Please provide me report on Estimation of Walter Model. It is about 2000 words count report on topic Walter Model.
What is the Benefits of divestment ¸ Releases cash tied up to finance more promising opportunities. ¸ Reduces diversification and complexity of a group in case of a demerger
how to get the expected growth rate?
Formation of Board of AMC and Restrictions on Directors Having regard to the significant role of the Board of Directors of the AMC in rendering the company's operations efficie
Role of Custodians The Securities and Exchange Board of India on 5th May, 1996, through its notification No.S.O.344 (E) has issued the SEBI (Custodian of Securities) Regulation
Leverages 'Leverages' are of prime importance in the analysis of a companies' risk. They give a good picture of the business, financial and the overall risk of a company's oper
A trade is assessed on the basis of its performance. Performance can be defined as the expected total return over and above the investment horizon of the trade. T
Swap-Linked Notes: Interest rate swaps are derivative products which help in transforming the cash flows of existing debt issues. These are not only useful in covering the exis
What is the usual pattern of cash flows for a share of preferred stock? How does the market determine the value of a share of preferred stock, given these promised cash flows?
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