What is the l imit on total exposure of an originator

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: