Banking · Securitization and SARFAESI Act
Consider the following statements regarding securitization and the SARFAESI Act: Statement 1: In a traditional securitisation transaction, the originator transfers legal title of assets to an SPV, converting future cash flows into immediate liquidity. Statement 2: The SARFAESI Act 2002 allows banks to enforce security interest upon default without court intervention if classified as NPA and a 60-day notice is served. Statement 3: Credit enhancement can be internal (over-collateralization, excess spread) or external (third-party guarantees) to improve credit ratings. Statement 4: Pass Through Certificates represent direct ownership in the underlying asset pool, where SPV passes collections directly to investors. Which of the following options is correct regarding the statements above?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1Statements 1, 2 and 3 are correct but Statement 4 is incorrect.
- 2Only Statement 2 and Statement 4 are correct.
- 3All statements 1, 2, 3 and 4 are correct.✓
- 4Statement 3 is the only correct statement among the four.
Correct answer
All statements 1, 2, 3 and 4 are correct.
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