project securitisation

8/3/2019 Project Securitisation

1/14

1

R.J. COLLEGE

PROJECT ON:

SECURITISATION & RECONSTRUCTION OF FINANCIAL ASSETS

AND ENFORCEMENT OF SECURITY INTEREST ACT, 2002

BACHCLORS OF COMMERCE (BANKING & INSURANCE)

2011-2012 SEMISTER -IV

Name Roll No. Signature

PROJECT GUIDEBY:


2/14

2

HINDI VIDYA PRACHAR SAMITIS

RAMNIRANJAN JHUNJHUNWALA COLLEGE

GHAKOPER (W.), MUMBAI-400086

CERTIFICATE

THIS IS TO CERTIFY THAT MR. .............

STUDENT OF B. COM (BANKING & INSURANCE) SEMESTER- 1

(2011-2012) HAS SUCCESSFULLY COMPLETED THE PROJECT ON

TEAM WORK UNDER THE GUIDANCE OF PROF. Mr. MOHSIN

SHERAWALA.

Signature


3/14

3

DECL

ARA

TION

THE STUDENT OF B.COM (BANKING & INSURANCE) -

(2011-2012) HEREBY DECLARES THAT WE HAVE COMPLETED

THE PROJECT ON TEAM WORK.

THE INFORMATION SUBMITTED IS TRUE AND ORIGINAL

TO THE BEST OF OUR KNOWLEDGE.


4/14

4

ACKNOWLEDGEMENT

WE WOULD LIKE TO EXPRESS OUR SINCERE GRATITUDE

TO THE A MIGHT THAT HAS SHOWERED HER BLESSING ON

US WITHOUT WHICH, THIS PROJECT WOULD HAVE NOT BEEN

POSSIBLE. WE WOULD ALSO LIKE TO EXPRESS OUR

HEARTFELT GRATITUDE TO OUR PRINCIPAL Dr. USHA

MUKUNDAN, WHO HAS GIVEN ME OPPORTUNITY TO CONDUCT

THIS STUDY AND OUR GUIDE MR. .ALSO

DESERVERS SINCERE THANKS BECAUSE THAY HAS GIVEN US

HIS GUIDANCE THROUGHOUT THE PROJECT & MADE IT

SUCCESSFULLY.

OUR PARENTS HAVE BEEN A BACKBONE TO US IN

COMPLETING THIS PROJECT & OUR FRIENDS WHO EXTENT

THEIR CONSTANT SUPPORTED DURING OUT STUDY ALSO

DESERVE HEARTFELT THANKS.


5/14

5

INDEX

Sr. No. Topic NamePageNo.

1 Introduction

2Definition of Securitisation and Reconstruction of Financial

Assets and Enforcement of Security Interest Act, 2002

3ENFORCEMENT OF SECURITY INTEREST

4Advantages Securitisation and Reconstruction of

Financial Assets

5 Securitisation Processs

6 Registration of reconstruction company


6/14

6

INTRODUCTION

The Securitization and Reconstruction of FinancialAssets and Enforcement of Security Interests Act, 2002 isan extremely important piece of legislation. Implemented inthe proper spirit, it can provide a safe harbor to securedlenders and may even encourage larger investorparticipation in corporate finance. On the other hand, iflenders step beyond the borders of security interests andclaim general property interests in secured assets, the lawmay lead to chaos and litigation. Many of the observationsof the author in the previous editions of the book have beenvindicated by later judicial pronouncements, includingthose of the Supreme Court. The authors incisive analysisweighs this enactment in the light of international law, theprinciples of equity, and of the common law. Beyond theenforcement of security interests, the present editionincludes elaborate chapters on other rights of a securedlender on nonperforming assets, including analysis of the

very sensitive question of choosing between workouts,winding up and attachment under this law. Securitizationis one of the most important financial instruments today. Itpassed through troublesome times pursuant to thesubprime crisis. Consequently, global regulators areengaged in formulating some very stringent rules onsecuritization. The Reserve Bank of India is also apparentlyin a similar mood. The author analyses the Guidelines of

the RBI, including the discussion paper on securitizationtransactions. This treatise provides the reader a thoroughgrasp of the concepts of securitization, asset managementand the rights of a secured lender.


7/14

7

The Securitisation and Reconstruction of FinancialAssets & Enforcement of Security Interest Act,2002

yThis Act may be called the Securitisation andReconstruction of Financial Assets and Enforcement ofSecurity Interest Act, 2002.

y It extends to the whole of India.y It shall be deemed to have come into force on the 21st

day of June, 2002.

Definitions:

(1) In this Act, unless the context otherwise requires,--(a) "Appellate Tribunal" means a Debts Recovery Appellate

Tribunal established under sub-section (1) of section 8of the Recovery of Debts Due to Banks and FinancialInstitutions Act, 1993 (51 of 1993);

(b) "Asset reconstruction" means acquisition by anysecuritisation company or reconstruction company of anyright or interest of any bank or financial institution in anyfinancial assistance for the purpose of realisation of suchfinancial assistance;

(c) bank" means--(i) a banking company; or

(ii) a corresponding new bank; or(iii) the State Bank of India; or(iv) a subsidiary bank; or(v) such other bank which the Central Government may, bynotification,specify for the purposes of this Act;


8/14

8

(d) "Banking company" shall have the meaning assigned toit in clause (c) of section 5 of the Banking Regulation Act,1949 (10 of 1949);

(e) "Board" means the Securities and Exchange Board ofIndia established under section 3 of the Securities andExchange Board of India Act, 1992 (15 of 1992);

(f) "Borrower" means any person who has been grantedfinancial assistance by any bank or financial institution orwho has given any guarantee or created any mortgage orpledge as security for the financial assistance granted by

any bank or financial institution and includes a personwho becomes borrower of a securitisation company orreconstruction company consequent upon acquisition by itof any rights or interest of any bank or financial institutionin relation to such financial assistance;

(g) "Central Registry" means the registry set up or cause tobet set up under sub-section (1) of section 20;

(h) "Corresponding new bank" shall have the meaningassigned to it in clause (da) of section 5 of the BankingRegulation Act, 1949 (10 of 1949); (ha) "debt" shall havethe meaning assigned to it in clause (g) of section 2 of theRecovery of Debts Due to Banks and Financial InstitutionsAct, 1993;(i) "Debts Recovery Tribunal" means the Tribunal

established under sub-section (1) of section 3 of theRecovery of Debts Due to Banks and Financial InstitutionsAct, 1993 (51 of 1993);


9/14

9

(j) "default" means non-payment of any principal debt orinterest thereon or any other amount payable by aborrower to any secured creditor consequent upon whichthe account of such borrower is classified as non-

performing asset in the books of account of the securedcreditor ;

(k) "Financial assistance" means any loan or advancegranted or any debentures or bonds subscribed or anyguarantees given or letters of credit established or anyother credit facility extended by any bank or financialinstitution;

(l) "Financial asset" means debt or receivables andincludes--(i) A claim to any debt or receivables or part thereof,whether secured or unsecured; or(ii) Any debt or receivables secured by, mortgage of, orcharge on, immovable property; or(iii) A mortgage, charge, hypothecation or pledge of movable

property; or(iv) Any right or interest in the security, whether full or partunderlying such debt or receivables; or(v) Any beneficial interest in property, whether movable orimmovable, or in such debt, receivables, whether suchinterest is existing, future, accruing, conditional orcontingent; or(vi) Any financial assistance;

(m) "Financial institution" means--(i) A public financial institution within the meaning ofsection 4A of the Companies Act, 1956 (1 of 1956);(ii) Any institution specified by the Central Governmentunder sub-clause (ii) of clause (h) of section 2 of the


10/14

10

Recovery of Debts Due to Banks and Financial InstitutionsAct, 1993 (51 of 1993);(iii) The International Finance Corporation establishedunder the

International Finance Corporation (Status, Immunities andPrivileges) Act, 1958 (42 of 1958);(iv) Any other institution or non-banking financial companyas defined in clause (f) of section 45-I of the Reserve Bankof India Act, 1934 (2 of 1934), which the CentralGovernment may, by notification, specify as financialinstitution for the purposes of this Act;

(n) "Hypothecation" means a charge in or upon anymovable property, existing or future, created by a borrowerin favour of a secured creditor without delivery ofpossession of the movable property to such creditor, as asecurity for financial assistance and includes floatingcharge and crystallization of such charge into fixed chargeon movable property;

(o) "Non-performing asset" means an asset or account of aborrower, which has been classified by a bank or financialinstitution as sub-standard, doubtful or loss asset,--

(a) in case such bank or financial institution isadministered or regulated by any authority or bodyestablished, constituted or appointed by any law for thetime being in force, in accordance with the directions orGuidelines relating to assets classifications issued by such

authority or body;(b)In any other case, in accordance with the directions

or guidelines relating to assets classifications issued by theReserve Bank;


11/14

11

(p) "Notification" means a notification published in theOfficial Gazette;

(q) "Obligor" means a person liable to the originator,

whether under a contract or otherwise, to pay a financialasset or to discharge any obligation in respect of a financialasset, whether existing, future, conditional or contingentand includes the borrower;

(r) "Originator" means the owner of a financial asset whichis acquired by a securitisation company or reconstructioncompany for the purpose of securitisation or asset

reconstruction;

(s) "Prescribed" means prescribed by rules made under thisAct;

(t) "Property" means--(i) Immovable property;

(ii) Movable property;(iii) Any debt or any right to receive payment of money,whether secured or unsecured;

(iv) Receivables, whether existing or future;(v) Intangible assets, being know-how, patent,

copyright, trade mark, licenses, franchise or anyother business or commercial right of similarnature;

(u) "Qualified institutional buyer" means a financialinstitution, insurance company, bank, state financialcorporation, state industrial development corporation,trustee or securitisation company or reconstructioncompany which has been granted a certificate of


12/14

12

registration under sub-section (4) of section 3 or any assetmanagement company making investment on behalf ofmutual fund or pension fund or a foreign institutionalinvestor registered under the Securities and Exchange

Board of India Act, 1992 (15 of 1992) or regulations madethere under, or any other body corporate as may bespecified by the Board;

(v) "Reconstruction company" means a company formedand registered under the Companies Act, 1956 (1 of 1956)for the purpose of asset reconstruction;

(w) "Registrar of Companies" means the Registrar asdefined in clause (40) of section 2 of the Companies Act,1956 (1 of 1956);

(x) "Reserve Bank" means the Reserve Bank of Indiaconstituted under section 3 of the Reserve Bank of IndiaAct, 1934 (2 of 1934);

(y) "scheme" means a scheme inviting subscription tosecurity receipts proposed to be issued by a securitisationcompany or reconstruction company under that scheme;

(z) "securitisation" means acquisition of financial assets byany securitisation company or reconstruction companyfrom any originator, whether by raising of funds by suchsecuritisation company or reconstruction company from

qualified institutional buyers by issue of security receiptsrepresenting undivided interest in such financial assets orotherwise;

(za) "securitisation company" means any companyformed and registered under the Companies Act,1956 (1 of 1956) for the purpose of securitisation;


13/14

13

(zb) "security agreement" means an agreement,instrument or any other document orarrangement under which security interest iscreated in favour of the secured creditor including

the creation of mortgage by deposit of title deeds with thesecured creditor;(zc) "secured asset" means the property on which securityinterest is created;(zd) "secured creditor" means any bank or financialinstitution or any consortium or group of banks orfinancial institutions and includes-(i) Debenture trustee appointed by any bank or financial

institution; or(ii) securitisation company or reconstruction company,whether acting as such or managing a trust set up by suchsecuritisation companyor reconstruction company for the securitisation orreconstruction, as the case may be; or(iii) any other trustee holding securities on behalf of a bankor financial institution, in whose favour security interest is

created for due repayment by any borrower of anyfinancial assistance;(ze) "secured debt" means a debt which is secured by anysecurity interest;(zf) "security interest" means right, title and interest of anykind whatsoever upon property, created in favour of anysecured creditor and includes any mortgage, charge,hypothecation, assignment other than those specified in

section 31;(zg) "security receipt" means a receipt or other security,issued by a securitisation company or reconstructioncompany to any qualified institutional buyer pursuant to ascheme, evidencing the purchase or acquisition by the


14/14

14

holder thereof, of an undivided right, title or interest in thefinancial asset involved in securitisation;(zh) "sponsor" means any person holding not less than tenper cent of the paid-up equity capital of a securitisation

company or reconstruction company;(zi) "State Bank of India" means the State Bank of Indiaconstituted under section 3 of the State Bank of India Act,1955 (23 of 1955);(zj) "subsidiary bank" shall have the meaning assigned to itin clause (k) of section 2 of the State Bank of India(Subsidiary Banks) Act, 1959 (38 of1959).

(2) Words and expressions used and not defined in this Actbut defined in the Indian Contract Act, 1872 (9 of 1872) orthe Transfer of Property Act, 1882 (4 of 1882) or theCompanies Act, 1956 (1 of 1956) or the Securities andExchange Board of India Act, 1992 (15 of 1992) shall havethe same meanings respectively assigned to them in those

Acts.

project securitisation

Documents