In simple words, Commercial Real Estate (CRE) can be described as any property which is used for non-residential purposes such as housing buildings, hotels, restaurants, gymnasiums, hospitals, condominiums, shopping malls, office blocks, theatres, amusement parks, cold storages, warehouses, educational institutions, industrial parks etc. In terms of Basel II definition if the repayment primarily depends on…
In securitization, credit enhancement refers to a risk-reduction technique that increases the credit profile of structured financial products or transactions. Credit enhancement may be divided into First Loss facility and Second Loss facility. First loss facility represents the first level of financial support to a special purpose vehicle (SPV) as part of the process in…
The ‘Securitisation’ is a two-stage process in which pool of assets are structured or packaged and sold by an originator(Banks and financial institutions) to a bankruptcy remote* special purpose vehicle (SPV). In the first stage there is sale of single asset or pooling and sale of pool of assets to a SPV in return for…
Currently the banks are mandated to extend collateral-free agriculture loans up to Rs.1 lakh. This limit of Rs.1 lakh was fixed in the year 2010.In view of overall inflation and rise in agriculture input cost since 2010, Reserve Bank of India vide its circular RBI/2018-19/118 FIDD.CO.FSD.BC.No.13/05.05.010/2018-19 dated February 7, 2019 advised all the scheduled commercial…
Deferred Payment Guarantee is a guarantee for a payment usually on installments which has been deferred or postponed. Banks issue DPG in the cases of purchase of capital goods/machinery where the seller offers credit to the buyer and buyer’s bank guarantees the due payments to the seller. Here the seller draws drafts of different maturities…
“Prudential norms” are the guidelines and general norms issued by the banking regulator (the central bank) of the country for the proper and accountable functioning of banks and financial institutions. The provisioning requirements for all types of standard assets, sub-standard assets, Doubtful assets and Loss assets stands as below. Standard assets: Banks should make general…
Pursuant to the announcement in the interim budget 2019, the Reserve Bank of India carried out circular asking banks to extend the facilities of Kisan Credit Card (KCC) to Animal Husbandry farmers and Fisheries to help them meet their working capital requirements. According to RBI circular FIDD.CO.FSD.BC.12/05.05.010/2018-19 dated Feb 4, 2019, the new KCC facility…
The syndication of loans is an internationally practiced model for financing credit requirements of a borrower in lieu of consortium advance. Apparently, the syndication of credit line is similar to consortium finance but slightly different in certain aspects. First of all, there is no restriction with regard to quantum of credit involved for credit syndication.…
In consortium lending system, two or more lenders join together to finance a single borrower. The lending banks formally join together, by way of an inter-se agreement to meet the credit needs of a borrower. Here, the sanction of limits to a borrower is completed with common appraisal, common documentation and monitoring the advance with…
The multiple banking arrangements are similar to a consortium advance and loan syndication, wherein several lenders finance a single borrower. However, there are many structural and operational differences among them. In multiple banking arrangements, a borrower borrows simultaneously from more than one bank independent of each other. Each lending bank takes separate loan documents and…