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FPIs have sold Indian shares worth $14.4 billion in 2021 and $24.5 billion in 2022 till August. Fourth tranche of Bharat Bond ETF likely in DecemberThe maiden offering of Bharat Bond ETF was launched in 2019, helping CPSEs raise Rs 12,400 crore. In the second and third tranches, it had raised Rs 11,000 tranches meaning crore and Rs 6,200 crore, respectively. The ETF has raised Rs 29,600 crore in its three offerings so far. Till the process of dematerialization is completed, the bonds will be held in RBI’s books. The facility for conversion to demat will also be available subsequent to allotment of the bond.
Only securitisations that additionally satisfy all the criteria laid out in Annex 1 of these directions fall within the scope of the STC framework. The above criteria are based on the prescriptions of the Basel Committee on Banking Supervision. Exposures to securitisations that are STC-compliant can be subject to the alternative capital treatment as determined by Clauses 108 to 110. In cases where the originator has purchased loans from another lender, the provisions of Clause 30 shall apply to the lender from whom the originator has purchased the exposures, as well. Listing of securitisation notes, especially in respect of certain product class, such as RMBS, and/or generally above a certain threshold is recommended, though not mandatory.
On maturity, the Gold Bonds shall be redeemed in Indian Rupees and the redemption price shall be based on simple average of closing price of gold of 999 purity of previous 3 business days from the date of repayment, published by the India Bullion and Jewelers Association Limited. Yes. A customer can apply online through the website of the listed scheduled commercial banks. The issue price of the Gold Bonds will be ₹ 50 per gram less than the nominal value to those investors applying online and the payment against the application is made through digital mode.
The originator should disclose to investors the weighted average holding period of the assets securitised and the level of their MRR in the securitisation. To account for tranche maturity, lenders shall use linear interpolation between the risk weights for one and five years. When a bank provides full credit protection to a securitisation exposure, it must calculate its capital requirements as if it directly holds the portion of the securitisation exposure on which it has provided credit protection . The threshold at which clean-up calls become exercisable shall not be more than 10% of the original value of the underlying exposures or securitisation notes. The service provider shall hold in trust, on behalf of the investors, the cash flows arising from the underlying and should avoid co-mingling of these cash flows with their own cash flows.
In such cases, the liquidity facility provided by a third party shall be treated as a credit enhancement. Any utilization / draw down of the credit enhancement should be immediately written-off by debit to the profit and loss account by facility provider. In the case of amortising credit-enhancing interest-only strip, a lender would periodically receive in cash, only the amount which is left after absorbing losses, if any, supported by the credit-enhancing interest-only strip. On receipt, this amount may be credited to Profit and Loss account and the amount equivalent to the amortisation due may be written-off against the “Unrealised Gain on Loan Transfer Transactions” account bringing down the book value of the credit-enhancing interest-only strip in the lender’s books. The representation or warranty is not open-ended and, in particular, does not relate to the future creditworthiness of the assets, the performance of the SPE and/or the securitisation notes the SPE issues. The total exposure of an originator to the securitisation exposures belonging to a particular securitisation structure or scheme should not exceed 20% of the total securitisation exposures created by such structure or scheme.
These figures should be based on the information duly certified by the SPE’s auditors obtained by the originator from the SPE. 106. In the case of market risk hedges such as currency or interest rate swaps, the risk weight will be inferred from a securitisation exposure that is pari passu to the swaps or, if such an exposure does not exist, from the next subordinated tranche. The clean-up call options, if any, should not be structured to avoid allocating losses to credit enhancements or positions held by investors or otherwise structured to provide credit enhancements. The holders of the securitisation notes issued by the SPE against the transferred exposures have the right to pledge or trade them without any restriction, unless the restriction is imposed by a statutory or regulatory risk retention requirement. If any of the conditions are not satisfied, a liquidity facility will be regarded as serving the economic purpose of credit enhancement.
All lending institutions are advised to take necessary steps to ensure compliance with these directions. Moody’s sees stress in ABS deals backed by loan against property to SMEsDelinquency rates in ABS deals backed by loans against property to SMEs will increase in 2018, because of the tougher operating environment for SMEs. For valuation of pass-throughs, weighted average maturity and weighted average coupon methods are used. These methods are employed for computing cash flows from the pass through MBS. In the real world, traders and money managers employ Bloomberg, CITI’s Yield book and Barclays’ POINT to analyse CDOs.
MRR should not be reduced either through hedging of credit risk or selling or encumbering the retained interest. MRR has to be maintained by the originating lender itself and not by any of its group entities. The form of MRR should not change during the life of securitisation. The MRR as a percentage of unamortised principal should be maintained on an ongoing basis except for reduction of retained exposure due to repayment or through the absorption of losses.
A lender is not permitted to use any external credit assessment for risk-weighting purposes where the assessment is at least partly based on unfunded support provided by the lender. For example, if a lender buys asset-backed securities where it provides an unfunded securitisation exposure , and that exposure plays a role in determining the credit assessment on the ABS, the lender must treat the ABS as if it were not rated. The lender must continue to hold capital against the other securitisation exposures it provides (eg against the liquidity facility and/or credit enhancement).
Forms of physical gold are coins, bars, jewellery among others. The nominee/nominees to the bond may approach the respective Receiving Office with their claim. The claim of the nominee/nominees will be recognized in terms of the provision of the Government Securities Act, 2006 read with Chapter III of Government Securities Regulation, 2007.
The disclosure by an originator of its fulfilment of the MHP and MRR should be made available publicly and should be appropriately documented; for instance, a reference to the retention commitment in the prospectus for securitisation notes issued under that securitisation programme would be considered appropriate. The disclosure should be made at origination of the transaction, and should be confirmed thereafter at a minimum half yearly (end-September and March), and at any point where the requirement is breached. The above periodical disclosures should be made separately for each securitisation transaction, throughout its life, in the servicer report, investor report, trustee report, or any similar document published. Unfunded reserve accounts, such as those to be funded from future receipts from the underlying exposures and assets that do not provide credit enhancement related to these instruments must not be included in the above calculation of A and D. The securitisation does not contain clauses that require the originator to replace or replenish the underlying exposures to improve the credit quality of the pool in the event of deterioration in the underlying credit quality, except under conditions specifically permitted in these Directions.
The face value of an MBS, therefore, decreases over time. The tranches that constitute a broader asset pool are ordinarily defined within transaction documentation are allocated with different classes of notes and each represents a different bond credit rating. Bonds can be used as collateral for loans. The loan-to-value ratio is to be set equal to ordinary gold loan mandated by the Reserve Bank from time to time. The lien on the bond shall be marked in the depository by the authorised banks. Sovereign Gold Bond Scheme was launched by Govt in November 2015, under Gold Monetisation Scheme.
The reset of credit enhancement would be subject to the consent of the investors in the securitisation notes. The consent may either be explicitly obtained during every reset or the transactions documents may contain general clauses providing implicit consent of the investors for rest of credit enhancement. At the time of reset, all the outstanding tranches of securitisation notes should be re-rated . The first reset of credit enhancement will not be permitted if the rating of any of the tranches has deteriorated vis-a-vis the original rating of these securitisation positions. Subsequent resets would not be permitted if the rating of any of the tranches has deteriorated vis-à-vis the rating at the time of previous reset. Investors should consider whether the originator, servicer and other parties with a fiduciary responsibility to the securitisation note holders have an established performance history for substantially similar credit claims or receivables to those being securitised and for an appropriately long period of time.
However, the investor does not lose in terms of the units of gold which he has paid for. Provisions should be documented for the replacement of servicers, bank account providers, derivatives counterparties and liquidity providers in the event of failure or non-performance or insolvency or other deterioration of creditworthiness of any such counterparty to the securitisation. To help ensure servicers have extensive workout expertise, thorough legal and collateral knowledge and a proven track record in loss mitigation, such parties should be able to demonstrate expertise in the servicing of the underlying credit claims or receivables, supported by a management team with extensive industry experience. The servicer should at all times act in accordance with reasonable and prudent standards. The originator of the securitisation is expected, where underlying credit claims or receivables have been acquired from third parties, to review the underwriting standards of these third parties and to ascertain that they have assessed the obligors’ “ability and volition to make timely payments on obligations”. The capital charges computed based on the prescribed risk weights are subject to a cap of the actual exposure in respect of which capital adequacy is being computed such that the capital requirement for any securitisation position does not exceed the securitisation exposure amount.
The RBI gives a discount of Rs 50 per gram for investors who apply for SGB through an online platform. This will help cash-starved MSMEs access funds to meet their obligations such as paying salaries. Further, relaxing the definition of MSMEs addresses the perverse incentives of wanting to remain small. This will incentivise MSMEs to scale up as and when the economy picks up, without worrying about not being able to take advantage of existing incentives. Clearing all pending due of MSMEs, though not a reform, will help ease their liquidity woes further.
However, a minimum gap of six months should be maintained between successive resets. In structures where external credit enhancements exist providing first loss credit enhancement and second loss credit enhancement , the reset may be carried out simultaneously between FLCE and SLCE in a proportion such that the reset maintains at least the outstanding rating [as envisaged in above] of SLCE. If reset is permissible in terms of above, the amount of credit enhancement required for retaining the original or current outstanding rating, whichever is higher should be determined by the concerned rating agency for the first reset. Similarly, for subsequent resets, the amount of credit enhancement required for retaining the higher of the rating at the time of previous reset and current outstanding rating should be determined by the concerned rating agency. The facility provider has obtained legal opinion that the terms of agreement protect it from any liability to the investors in the securitisation or to the SPE / trustee, except in relation to its contractual obligations pursuant to the agreement governing provision of the facility.
In all circumstances, all credit claims or receivables must be originated in accordance with sound and prudent underwriting criteria based on an assessment that the obligor has the “ability and volition to make timely payments” on its obligations. Repayment of noteholders should mainly rely on the principal and interest proceeds from the securitised assets. Partial reliance on refinancing or re-sale of the asset securing the exposure may occur provided that re-financing is sufficiently distributed within the pool and the residual values on which the transaction relies https://1investing.in/ are sufficiently low and that the reliance on refinancing is thus not substantial. The nature of assets should be such that investors would not need to analyse and assess materially different legal and/or credit risk factors and risk profiles when carrying out risk analysis and due diligence checks of each asset. 116. The Notes to Annual Accounts of the originators should indicate the outstanding amount of securitised assets as per books of the SPEs and total amount of exposures retained by the originator as on the date of balance sheet to comply with the MRR.
The facility is limited to a specified amount and duration. Payment of any fee or other income for the facility is not subordinated or subject to deferral or waiver. Damages are limited to losses directly incurred as a result of the breach. Any representation or warranty is provided only by way of a formal written agreement.
Based on the information provided by the originator, the investor must make its own assessment of the securitisation‘s STC compliance status before applying the alternative capital treatment. The SPE should make it clear to the investors in the securitisation notes issued by it that these securitisation notes are not insured and that they do not represent deposit liabilities of the originator, servicer or trustees. For underlying loans with original maturity of more than 24 months as well as loans with bullet repayments, as mentioned in proviso to Clause 6, the MRR shall be 10% of the book value of the loans being securitised. Provided that when there are several tranches that share the same rating, only the most senior tranche in the cash flow waterfall would be treated as senior . “No need to issue cheques by investors while subscribing to IPO. Just write the bank account number and sign in the application form to authorise your bank to make payment in case of allotment. No worries for refund as the money remains in investor’s account.”
The rise in interest rates generally has a bearing on MBS prices in the secondary market as there exists an inverse relationship between interest rates and bond prices. Investors are allocated a monthly cash flow keeping in mind the MBS tranche within which they have invested their money. They have the choice to then sell their holdings and generate a quick profit or hold onto them and realise modest but long-term gains that are provided in the form of interest payments.
The SPE and/or investors in the securitisation notes issued by the SPE have the clear right to select an alternative party to provide the facility subject to compliance of instructions in this direction. Provision of the facility should be structured in a manner to keep it distinct from other facilities and documented separately from any other facility provided by the facility provider. The nature, purpose, extent of the facility and all required standards of performance should be clearly specified in a written agreement to be executed at the time of originating the transaction and disclosed in the offer document. NBFCs which are required to comply with Indian Accounting Standards shall continue to be guided by the Standards and the ICAI Advisories with respect to accounting for securitisation exposures and transactions.
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