abhishreshthaa
Abhijeet S
CASE STUDY
The impact of Securitisation in the books of originator and SPV can be explained with the help of the following example.
The Originator ‘X’ bank has issued home loans worth Rs. 100 Lac with an effective finance charge of 16.5% p.a and average maturity of seven years. The home loans are received in equal monthly installments. ‘X’ Bank has financed this entirely from deposits raised on an average@ 14.5% p.a. Now it need to money to repay the deposit.
The amount of principal collected by the Bank is generally recycled to maintain the level of operation. Either there should be ploughed back profit or new flow to match retirement of deposits.
In case the Bank is able to maintain the principal outstanding, it would have Rs. 100 Lac outstanding principal on home loan stock at any point of time (assuming a no growth situation).
The impact of Securitisation in the books of originator and SPV can be explained with the help of the following example.
The Originator ‘X’ bank has issued home loans worth Rs. 100 Lac with an effective finance charge of 16.5% p.a and average maturity of seven years. The home loans are received in equal monthly installments. ‘X’ Bank has financed this entirely from deposits raised on an average@ 14.5% p.a. Now it need to money to repay the deposit.
The amount of principal collected by the Bank is generally recycled to maintain the level of operation. Either there should be ploughed back profit or new flow to match retirement of deposits.
In case the Bank is able to maintain the principal outstanding, it would have Rs. 100 Lac outstanding principal on home loan stock at any point of time (assuming a no growth situation).