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    Question

    In case of securitization of standard assets, what is

    the Minimum Retention Requirement (MRR) for underlying loans of maturity greater than 24 months ?
    A 20% of the book value for loans being securitised Correct Answer Incorrect Answer
    B 15% of the book value for loans being securitised Correct Answer Incorrect Answer
    C 10% of the book value for loans being securitised Correct Answer Incorrect Answer
    D 7.5% of the book value for loans being securitised Correct Answer Incorrect Answer
    E 5% of the book value for loans being securitised Correct Answer Incorrect Answer

    Solution

    Securitization isтАпthe process of converting illiquid assets, like loans, into tradable securities, essentially transforming them into a form that can be bought and sold in the marke t. ┬а In securitization, the Minimum Retention Requirement (MRR) is a key aspect, as defined by the Reserve Bank of India (RBI) in its Master Directions.тАпIt mandates that originators of securitized assets retain a certain percentage of the credit risk associated with those assets.тАпThis ensures the originator has a continued stake in the performance of the securitized assets and encourages them to carry out proper due diligence.тАп ┬а MRR Requirements (as per RBI guidelines): ┬а

    • For loans with a maturity of 24 months or less, the MRR is 5% of the book value of the loans being securitized.тАп ┬а
    • For loans with a maturity greater than 24 months , the MRR is 10%. ┬а

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