CA Final · Advanced Financial Management · Securitization
In a typical securitization transaction in India, which party buys the pool of receivables from the originator and issues securities to investors against them?
The Special Purpose Vehicle buys the receivables from the originator and issues securities to investors. It is a separate legal entity created for the transaction. The servicer merely collects the dues, the obligor is the borrower, and the rating agency only assesses credit quality.
- AServicer
- BSpecial Purpose Vehicle (SPV)Correct
- CCredit rating agency
- DObligor
Explanation
The originator sells the identified receivables to an SPV, usually a trust or company, which funds the purchase by issuing pass-through or other securities to investors. The servicer only collects and remits payments. The obligor is the borrower whose loan is in the pool. The rating agency only evaluates the securities.
Did you get it right without looking?
One question tells you little. A timed set on Securitization shows your real accuracy, how long you take and where you lose marks.
More Securitization questions
- In a typical Indian securitization of a pool of vehicle loans, Sundaram Finance Ltd (the lender that originated the loans) sells the receiva…
- Sunrise Finance Ltd. securitizes a pool of loans with a principal of Rs 50 crore. The SPV issues pass-through certificates of Rs 44 crore to…
- Sunrise Finance Ltd. (originator) pools 500 auto loans of Rs 4 lakh each, total Rs 20 crore, and sells the pool to an SPV at Rs 20.5 crore. …
- An SPV acquires a pool of vehicle loans of Rs 200 crore. The rating agency estimates the expected loss at 3% of the pool and requires credit…
- Kaveri Auto Finance has vehicle loans with a book value of ₹10 crore. These will yield total collections of ₹11.55 crore at the end of one y…
- Kaveri Bank securitizes a Rs 200 crore pool of home loans through an SPV. The servicer, Kaveri Bank itself, collects EMIs from borrowers and…