Unit - 21: Regulation and Securitisation and Reconstruction of Financial Assets of Banks and Financial Institutions
Legal & Regulatory Aspects of Banking -
Unit - 21 : Regulation and Securitisation and Reconstruction of Financial Assets of Banks and Financial Institutions . The SARFAESI Act has streamlined the functions of the securitisation and reconstruction companies for dealing with financial assets of banks and financial institutions .
Regulation of Securitisation Company or Reconstruction Company : The securitisation company can commence or carry business, only after complying with the following two conditions: a) To Obtain certificate of Registration from RBI by applying in prescribed format. b) To have owned funds at the time of registration not less than INR 2 Crore or such other amount not exceeding 15 % of the total financial assets acquired .
Cancellation of Certificate of Registration: The registration granted to the securitisation company by RBI is cancellable on following grounds: The company ceases to carry on the business. Company Fails to comply with any of the conditions. Company ceases to receive or hold any investment from a QIB.
Acquisition of Rights of Interest in Financial Assets: The acquisition of assets involves the propor notices and procedures .
Registration of Securitisation Company Or Reconstruction Company - can commence or carry business if 1. Obtain certification of registration from RBI 2. It has the owned funds not less than 2 Crores Cancellation of Certificate of Incorporation 1. The company ceases to carry on the business 2. The company ceases to receive or hold any investment from a qualified institutional buyer. 3. The company fails to comply with any of the conditions subject to which the certificate of registration was granted 4. Fails to comply with RBI directions. 5. Fails to maintain accounts in accordance with directions issued by RBI. 6. Fails to give accounts and documents to RBI for inspection. Asset Reconstruction means acquisition of any right or interest of any bank of financial institution in any financial asset for the purpose of realisation. The four documents involved in the Securitisation Transaction Offer Document – Full details of financial asset, loan details of bank etc. Debenture – A debenture for payment of consideration to be paid to the bank or financial institution for acquisition asset from it. Agreement – it is with originator to continue to service the assets. Security Receipt – It is in favour of investors. Any direction issued by the RBI under SARFAESI Act has Statutory effect and is binding on the parties concerned. After application of SARFAESI Act existing companies have to get registered within six months from commencement of the Act