Catch 22 Lyric - the ulti funda love story

God definitely made me for her, just like "HE" made flowers for the bees;
Still remember those mystical words of her, teach me economics please.

Immediately read behind those words, coz she pretty well knew in economics i was a big zero;
In an hour of economics, she said Vicky you are my biggest hero.

She was "er" a million times more beautiful than Ash, coz she was so beautifully lavished like the moon;
Life would once again become like the arid deserts of Sahara, when on a date she would desert me very soon.

she was the single most valuable asset of my life, coz she was always close to my heart;
Our love started compounding, as we started graphing our love chart.

I was jealous of her countless admirers, but her love for me was as boundless as the ocean;
She always stuck to me in every happy, sad and almost every occasion.

God definitely made me for her, just like "HE" made flowers for the bees;
Anyone's who thinking, i was talking of a girl, sorry it was the Indian rupee

Securitisation vs sale of receivables connundrum

Case: Whether securitisation rules of the Reserve Bank of India should be applied to sale/assignment of receivables.

My analysis.

Para 2 of the RBI - Securitisation is a process by which assets are sold to a bankruptcy remote special purpose vehicle (SPV) in return for an immediate cash payment. The cash flow from the underlying pool of assets is used to service the securities issued by the SPV. Securitisation thus follows a two-stage process. In the first stage there is sale of single asset or pooling and sale of pool of assets to a 'bankruptcy remote' special purpose vehicle (SPV) in return for an immediate cash payment and in the second stage repackaging and selling the security interests representing claims on incoming cash flows from the asset or pool of assets to third party investors by issuance of tradable debt securities.

By virtue of this definition, RBI does not intend to rope in pure sale of financial receivables between two parties at arms length price. I view this guidelines a measure to regulate SPV' and more importantly protect investors interests who subscribe to PTC's issued on the security of the pool of receivables to third party investors.

Guidelines on regulating SPV's, the Securitisation Act are all in the mode of continuous evolution as can be seen by the frequent changes/notifications on the Acts relating to SPV's. As the process also involves issuing of PTC's to third parties, there is a fiduciary responsibility of the RBI to closely protect the investors interests. A reading through Para 7 and Para 8 of the guidelines throws light on the RBI's fiduciary responsibility on insulating and minimizing financial risks to parties involved to complete a securitisation transaction.

These stiffer guidelines are akin to the differentiation which RBI maintains for NBFC's accepting public deposits and those that do not. NBFC's accepting public deposits are closely monitored and have stringent regulations than those who do not as public money is involved and it is RBI's responsibility to ensure there is no financial loss to public depositors.

A similarity in the nature of the transactions between securitisation and assignment should not be driving the accounting and measurement principles. The true sale criteria is to be viewed as a brightline to test the rights and obligation assertion while drawing up the financial statements.

True sale is also more of a substance over form issue and should not be restricted to guidelines laid by the RBI (in para 7) as these maynot be exhaustive. For eg. RBI's guidelines have no reference to synthetic securitizations or Tier II level securitizations, but intrue sense these will be need to be covered. Securitisation transactions are in the nascent stage in India and are not as maturedas US markets. We can definitely see more circulars over the next fewyears, when markets become more and more innovative and matured.

Differentiation between assignment and securitisation as per RBI is clearly laid GAAP practice in India also has a differentiation in the accounting treatment. Also refer ICICI's accounting policies Draft Accounting standard AS 30 of ICAI (issued after RBI's circular)clearly lays down profits to be recognized upfront upon sale of financial assets and there is no reference to securitisation (as there is a guidance note to that effect) already issued.Assuming Company X were to sell its entire balance sheet (which comprises 99% of loans), in an outright buy over, would the position be the same that you will require Company X to defer its profits as per securitisation norms.Staying on securitisation's CATCH 22

Open thoughts:

This is a para to which i have been grappling with and am unclear on the purpose of the para of the Reserve Bank of India.

Para 11.11 Any utilization / draw down of the credit enhancement should be immediately written-off by debit to the profit and loss account.Should it be construed that for transactions in the nature of securitisations, we should not be providing for collections losses upfront at the time of securitisation as laid down by ICAI's guidance note and should record the loss on an "actual" basis. Go ahead and crack this question on the Catch 22 phrase

The opinions expressed above are solely mine and are not to be construed to be thrust upon others. Views and feedback are invited.

Romeo and Juliets Love fable - part deux

This is the tale of my beloved who will always be my first choice;
At every rendezvous, she would say Vicky i love you in her melodious voice.

I always cherished the moment when i met her for the first time in front of our office gate;
she was the most beautiful girl in the world, but second to Winslett Kate.

She was simple stunning, reminded me of the calm seas and the beautiful sunset;
she was definitely sweeter than all the pastries and cakes made at the cake shop Mc Renett.

Her long tresses, bright forehead, cultured face, ooof as gentle as a feather;
wherever she went spring was the weather.

Hands in hands, eyes to eyes, heart to heart, we spoke across that restaraunt table;
Somewhere my instincts told me, my love story would end up like the tragic Romeo and Juliets' love fable.

As i ate, i smelt smoke, thought i will alert the beautiful waitress to sound the fire alarm;
to my horror, "her" dad was fuming with an AK 47 in his arm.

Bang went the bullets, right in my head, as i lay dead ma girl hollered;
Wake up son, its time to buy potatoes mom ordered.

Question: What is the name of the class of organic compounds with the general formula R-OH, where R represents an alkyl group made up of carbon and hydrogen, and OH represents one or more Hydroxl groups?.....

Answer : Alchohol