53177137-Securitization-ppt__1_ (1).ppt

8/19/2019 53177137-Securitization-ppt__1_ (1).ppt

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Securitisation is the conversion of existing or

future cash flows into tradable securities

that can be sold to investors.

Securitisation is the process of pooling andrepackaging of homogenous illiquid financial

assets into marketable securities that can be

sold to investors


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It is the process by which assets such as loanreceivables, hire purchase debtors, leasereceivables, trade debtors are transformedinto securities.

It fundamentally involves conversion of longterm assets into cash/illiquid assets.


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Originator

The initial owner of the loans.

Sells them to the SPV

ObligorsThe loan customers.

Pay cashows that are securitised

SPVSpecial purpose

Vehicle

Set up specically for transaction.Purchases assets from Originator.

Company/Trust/ utual !und

"n#estorsSubscribe to securities

issued by SPV


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Collection

$gent

Collects money from Obligors%monitors and maintains assets.

&sually the originator

Credit 'ating$gency

Pro#ides a rating for the dealbased on structure% rating of partie( portfolio% legal and ta) opinion et


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Release of ocked!up funds

"ost of funds is reduced

Improved Ratios

Improved "#R $atching of #ssets and iabilities


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#ny type of asset with a reasonablypredictable stream of future cash flows canbe securiti%ed.

#ssets that are easiest to securiti%e arethose& that occur in large pools' for whichpast experience can be used to predictdefault rates' for which documentation isstandardi%ed' and for which ownership is

transferable.


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MBS (Mortgage based securitization ) : Securitisation based on immovable fixedassets is (nown as backed by mortgage.

ABS (Asset based securitization) :Securitisation against the current andmoveable fixed assets is known asSecuritisation )acked by assets.


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*ff balance sheet financing Regulatory capital relief Improvement of Ro"+ $ultiple alternative sources of funding

"onversion of illiquid assets into liquidsecurities

Systemically solves #$ problems


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+noys low cost operations and servicing dueto economies of scale of the originator

"redit risk is minimi%ed

+xposure on rated, low!risk housing loans+xpertise of originators helps maintain quality of

underlying assets

"redit enhancement possible


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"leaner books due to expertise of originators Systematically solves the #$ problems in the

sector

+ncourages an efficient market

Results in substantial benefits to the endcustomer of home loans


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-irst deal in India between "itibank and I" $utual-und, in 001 for Rs. 21 million.

Securitisation of cash flow of high value customers ofRaasthan State Industrial and 3evelopment "orporationin 004!05, structured by S)I cap.

Securitisation of overdue payments of 67 government

to 863"* by issue of tax!free bonds worth Rs. 511million Securitisation of Sales 9ax deferrals by overnment *f

$aharashtra in #ugust :11 for Rs. 511 million with agreen shoe option of Rs. ;5 million.

-irst deal in power sector by (arnataka +lectricity)oard for receivables worth Rs. 041 million and placed

them with 863"*. $ega securitisation deal of


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#shok eyland finance

"holamandalam investment > finance

+sanda finance

Sakthi finance 9ata finance

SR- finance


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*riginators

"hurn higher returns on lower capital base

Investors

"an invest in low!risk rated home loans paperwithout hassles of origination/ servicing

-inancial system as a whole

+xpertise of Specialists helps maintain quality

of underlying assets and reduces #$mismatches

8ome oan "ustomers

#ccess to cheaper funds


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?arasimham committee I > II

#ndhyaruina committee

Recommendations made by them +mpower banks > -I@s to take the possession of the

assets > to sell them wihout the intervention of thecourt, was enacted.


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9he Securitisation and Reconstruction of-inancial #ssets and +nforcement of SecurityInterest *rdinance, :11:. on :.12.:11:.

It received the assent of the 7resident on;.:.:11: and has now become an #ct.


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9his act empowers )anks and -Is ASecured"reditorsB and provides that the securedcreditors after 21 days notice &9ake possession of the securities and dispose

them off

9ake over the management of the assets

9his act empowers the )ank and financialinstitutions to directly enforce their right and

need not approach any court.


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9he process of enforcement of securities canbe done either &)y the banks/financial institutions

9hrough the #sset Reconstruction "ompaniescreated and registered under the act


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Securitisation company must be registered

+xisting companies to apply for registrationwithin 2 months

8as minimum net owned funds of Rs : "roreor 5C of the value of assets to besecuritised

R)I to conduct inspection

"ompany should not have incurred losses inany of the three preceding financial years

"o has made adequate arrangement for therealisation of assets.


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3irectors should have adequate professionalexperience

)oard Should not consist of more than half of

its members as nominee of one agency Reection of Registration & opportunity of

hearing

7rior #pproval & Required in case of

substantial "hange in the management orplace of business.


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"ancellation of Registration"ease to carry on business of securitisation

-ails to follow the directives of R)I

-ails to maintain accounts in the mannerprescribed by R)I

-ails to submit the returns or offer documentsfor inspection

-iling of appeal & Dithin E1 days to "entralovt.


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)ank/-I will give notice of tarnsfer of assetsto the obligor

6pon receipt of notice, obligor hence forth

will make the payment to the company Dhere no such notice is given and the

payment has been given to the original, samewill be held in the form of trust and will be

transferred to the company


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Speedy Recovery of ?7#s

*pening of ?ew )usiness #rea

3evelopment of Securitisation )usiness

Reconstruction of Sick 6nits

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