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SECURITIZATION OF ASSETS
What is securitization of assets in the context of Indian banking?
Securitization is the process by which illiquid assets (such as loans) are pooled together and converted into marketable securities, enabling the originator to raise funds by transferring the assets to a Special Purpose Vehicle (SPV).
What is the primary objective of securitization for an originating bank?
To convert illiquid assets into liquid tradeable securities for funding.
What is a Special Purpose Vehicle (SPV) in securitization?
An SPV is a legally separate entity created solely to purchase the pool of assets from the originator and issue securities (Pass Through Certificates or Pay Through Certificates) to investors, ensuring bankruptcy remoteness from the originator.
What is the meaning of 'off-balance sheet' treatment in securitization?
Securitized assets are removed from the originator's balance sheet after true sale.
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