Securitisation is the process in which the underlying pool of assets are structured or packaged and sold as financial instruments to investor(s) either directly or through a Special Purpose Vehicle (SPV). Typically in India, the originators or sellers are Banks, NBFC, HFC & others. The underlying assets are mainly secured loans like housing loans, auto loans, commercial vehicle loans, construction equipment loans, two-wheeler loans, tractor loans, three-wheeler loans and unsecured loans like personal loans, consumer durable loans. The SPV is formed in the form of trust, settled and managed by a trustee. The trust purchases the pool for a consideration either at par or premium. The investors subscribe to the Pass through Certificates (PTCs) issued by the trust. These PTCs are backed by the underlying loan receivables and the beneficial interest lies with investors. The Servicer (typically, Originator in India) is appointed by the trust to service the loans. Servicer passes on the periodic collections from the underlying borrowers to the trust which is further passed on to the investors as per scheduled payouts. Credit Enhancement is provided to an SPV to cover the losses associated with the pool of assets. 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 SPV as part of the process in bringing the securities issued by the SPV to investment grade. The provider of the facility bears the bulk (or all) of the risks associated with the assets held by the SPV. Second loss facility represents a credit enhancement providing a second (or subsequent) tier of protection to an SPV against potential losses. Liquidity Facility is provided to assure investors of timely payments. These include smoothening of timing differences between payment of interest and principal on pool of assets and payments due to investors.