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CMA Final · Strategic Financial Management · Securitization

Under the Indian securitization market framework, the practice of an originator purchasing back some assets from the SPV when the outstanding pool falls to a small percentage of the original size, to save on servicing costs, is known as:

This is called a clean-up call. It allows the originator to buy back the remaining small pool of receivables once the outstanding balance falls below a set percentage, because servicing a tiny pool is uneconomical. Cash collateral, by contrast, is a credit enhancement.

  1. AClean-up callCorrect
  2. BPut option
  3. CBullet repayment
  4. DCash collateral

Explanation

A clean-up call lets the originator or servicer repurchase the remaining pool once it falls below a specified small percentage, avoiding uneconomic servicing. Cash collateral is a credit enhancement, not a repurchase right.

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