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CMA Final · Strategic Financial Management · Securitization

A pool of auto loans of ₹100 crore is securitised by an NBFC through an SPV. Pool collections are expected to cover the investors' dues, and the structure provides credit enhancement through a cash collateral of 5% of the pool, set up by the originator. Investor-pay-out is to be a fixed 9% pa. If the SPV pays investors a year-end amount of principal ₹100 crore plus interest, what is the total amount payable to investors at year-end (single bullet, ignoring servicing fees and the collateral)?

Investors receive principal of ₹100 crore plus 9% interest of ₹9 crore, so ₹109 crore is payable at year-end. The 5% cash collateral is only credit enhancement against pool losses and is not an additional payment to investors.

  1. A₹105 crore
  2. B₹109 croreCorrect
  3. C₹114 crore
  4. D₹104 crore

Explanation

Interest = 9% of ₹100 crore = ₹9 crore. Total payable = 100 + 9 = ₹109 crore. The 5% collateral is a credit enhancement held to absorb losses; it is not added to investor payout (adding it gives ₹114 crore, which is wrong).

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