Question

    What is the l imit on total exposure of an originator

    /lender to the securitization exposures belonging to a securitisation structure or scheme ?
    A 10% Correct Answer Incorrect Answer
    B 20% Correct Answer Incorrect Answer
    C 30% Correct Answer Incorrect Answer
    D 35% Correct Answer Incorrect Answer
    E 40% Correct Answer Incorrect Answer

    Solution

    A regulations with respect to the securitization of standard assets, as given by RBI are as follows:  

      • Applicability - SCBs, AIFIs, and NBFCs including HFCs; (RRBs and Cooperative banks are not permitted for securitisation    
    • Limit on total exposure of an originator to the securitization exposures belonging to a securitisation structure or scheme – 20%  
    • Minimum Retention Requirement (MRR) requirement:  
        • for underlying loans of maturity – 24 months or less; - 5% of the book value of the loans being securitized  
    • for 24 months and more and loans with bullet repayments - 10% of the book value of the loans being securitized  
    • Assets not eligible for securitisation :    
      • Re- securitisation exposures;  
      • Structures in which short term instruments such as commercial paper, which are periodically rolled over, are issued against long term assets held by a Special Purpose Entity (SPE)  
      • Synthetic securitisation ;  
      • Securitisation with the following assets as underlying:  
    i ) revolving credit facilities as underlying   ii) Restructured loans and advances which are in the specified period;   iii) Exposures to other lending institutions;   iv) Refinance exposures of AIFIs;   v) Loans with bullet payments of both principal and interest as underlying; and,   vi) Loans with residual maturity of less than 365 days  

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