In case of securitization of assets, to ensure that the originators have a continuing stake in the performance of securitised assets, the ______ is mandated by RBI.

Solution

Minimum Retention Requirement (MRR) The MRR is primarily designed to ensure that the originators have a continuing stake in the performance of securitised assets so as to ensure that they carry out proper due diligence of loans to be securitised. The originators should adhere to the MRR as detailed below while securitising loans leading to issuance of securitisation notes other than residential mortgage backed securities: a.   For underlying loans with original maturity of 24 months or less, the MRR shall be 5% of the book value of the loans being securitised. b.   For underlying loans with original maturity of more than 24 months as well as loans with bullet repayments, as mentioned in proviso to Clause 6, the MRR shall be 10% of the book value of the loans being securitised.