PTC vs direct assignment is the choice between the two main ways Indian lenders sell loan pools: pass-through certificates and direct assignment. In a PTC transaction the loans move to a special purpose vehicle that issues certificates to investors, with credit enhancement allowed. In direct assignment the loans are sold straight to another lender, with no vehicle and no credit enhancement permitted.
Key Takeaways
- PTCs are securitisation: an SPV buys the pool and issues notes, and the originator can provide credit enhancement.
- Direct assignment is a bilateral sale of loans to another regulated lender, with no SPV and no credit enhancement.
- Under the RBI 2021 directions, PTCs carry a minimum retention of 5% or 10% depending on loan maturity, and a minimum holding period applies to both routes.
- PTCs suit lenders who want a wider investor base and tranching. Direct assignment suits lenders selling to a bank that wants the loans on its own book.
- Clean loan-level data decides how fast either route closes, and ABSO (Asset Backed Securitisation Orchestration) builds the tape from the underlying documents and structures the pool for either route.
What Are Pass-Through Certificates
A pass-through certificate, or PTC, is the form a securitisation note usually takes in India. The originating lender sells a pool of loans to a special purpose vehicle, typically a trust. The trust issues PTCs to investors, and the cash borrowers pay is passed through to the certificate holders according to the cash flow waterfall.
Because the notes can be split into classes, a PTC deal can offer senior and junior tranches and can carry credit enhancement such as cash collateral or overcollateralisation provided by the originator.
Those are the structuring decisions ABSO, the securitisation and pool structuring platform, is built for. It models the tranches, the credit enhancement and the waterfall for a PTC pool.
What Is Direct Assignment
Direct assignment, often shortened to DA, is the outright sale of a pool of loans from one lender to another. There is no vehicle and no certificate. The buyer, usually a bank, takes the loans onto its own balance sheet and becomes the lender of record, while the seller often continues to service them.
The RBI covers direct assignment under its rules on the transfer of loan exposures, now part of the Transfer and Distribution of Credit Risk Directions, 2025. The buyer receives the loans as they are, because credit enhancement and liquidity facilities are not permitted on a direct assignment.
Direct assignment has long been popular with banks buying pools to meet priority sector lending targets, because the loans sit on the bank's own book and count towards those targets directly. For these deals ABSO produces the loan-level file and diligence pack the buying bank needs.
PTC Vs Direct Assignment, Side By Side
| Feature | PTC (Securitisation) | Direct Assignment |
|---|---|---|
| Structure | Loans sold to an SPV, which issues certificates | Loans sold straight to another lender |
| Who buys | Investors in the certificates | A bank or other regulated lender |
| Credit enhancement | Allowed | Not permitted |
| Tranching | Possible, senior and junior classes | Not applicable |
| Minimum retention by the seller | 5% or 10%, by loan maturity | Removed, except where the buyer skips loan-level diligence |
| Minimum holding period | Applies | Applies |
| How ABSO handles it | Models tranches, credit enhancement and the waterfall | Produces the loan-level file and diligence pack |
The two routes often compete for the same pool. The right choice depends on who the buyer is, how much capital relief the seller needs and whether the pool benefits from tranching.
The RBI Rules On Retention, Holding And Ticket Size
In September 2021 the RBI issued two master directions that replaced the earlier framework: one on securitisation of standard assets, covering PTCs, and one on the transfer of loan exposures, covering direct assignment. In November 2025 the RBI consolidated both into directions for each type of lender, such as the Securitisation Transactions Directions, 2025 and the Transfer and Distribution of Credit Risk Directions, 2025 for NBFCs. The main requirements carried over, and are these.
- Minimum retention requirement. For securitisation, the originator keeps 5% of the pool where the underlying loans have an original maturity of 24 months or less, and 10% where it is longer. For residential mortgage-backed securities the figure is 5% whatever the maturity.
- Minimum holding period. Loans must be held for a period before they can be sold: 3 months for loans with a tenure of up to 2 years, and 6 months for longer loans.
- Minimum ticket size. Securitisation notes carry a minimum ticket of ₹1 crore.
- Listing. Where securitisation notes are offered to 50 or more persons, they must be listed on a stock exchange.
- Direct assignment. Risk retention is not required unless the buyer does not carry out due diligence on every loan, and no credit enhancement or liquidity facility may be provided.
Regulation changes, so the current text of both directions should be checked, and advice taken, before a transaction is structured.
How NBFCs Choose Between PTC And Direct Assignment With ABSO
The choice turns on five factors. ABSO structures the same pool for either route, so each factor can be weighed against the actual loans.
- The buyer. If a bank wants loans for its own book, perhaps to meet priority sector targets, direct assignment is usually simpler, and ABSO prepares the loan-level file that bank will test.
- Capital relief. Direct assignment moves the loans off the seller's balance sheet with no retained enhancement. PTCs keep a retained slice and any credit enhancement on the seller's side.
- The pool. A granular pool of small loans with a long history often suits a rated, tranched PTC deal that can reach a wider investor base. ABSO models credit enhancement in minutes, so an issuer can test combinations quickly.
- Cost. Tranching can lower the blended cost of funds, but a PTC carries rating, trustee and legal costs that a direct assignment avoids.
- The data. Both routes need a clean loan tape with loan-level detail, and ABSO builds that tape from the underlying documents.
PTC Vs Direct Assignment: Capital And Accounting
Whether sold loans leave the seller's balance sheet depends on accounting tests as well as the regulatory rules. Where the seller keeps a meaningful share of the risk, for example through retained tranches or credit enhancement, the loans may stay on its books for accounting purposes.
The capital benefit of a deal therefore depends on how it is treated in the accounts as well as on the cash raised, and the treatment of each route is usually agreed with auditors before a choice is made.
Why The Loan Tape Decides The Timeline
Most delays in either route come from the loan tape: the file listing every loan, its terms and its payment history. Investors and buyers run their own checks, and every mismatch between the tape and the loan documents adds a round of questions.
Lenders who hold document-level data on each loan can answer those questions in hours. Those who rebuild the tape by hand for every deal lose weeks. Loans originated in LOA, the Loan Origination Assistant, carry that data from intake, and ASF tapes and pool extractions are generated from the same record.
Servicing adds another layer. In both routes the originator usually keeps collecting from borrowers, so the buyer or trustee needs regular, loan-level reports on payments, arrears and recoveries for the life of the pool. A tape that is rebuilt by hand each month is where errors creep in, and ABSO keeps loan-wise servicing data attached to the pool.
How ABSO Supports PTC And Direct Assignment Deals
ABSO aggregates eligible loans, builds the tape from the underlying documents and structures the pool for either route.
Buyers, trustees and rating agencies read from the same shared record, so the version of the pool each party reviews is identical. From loan tape to issuance typically takes 8 to 10 weeks. Clean files flow in from LOA, and the broader flow is described in how loan pools become liquidity.
Model Your Next Pool In ABSO
- Book an ABSO securitisation demo with the Istakapaza team.
- Bring a loan tape for a candidate pool, with loan-level terms and payment history, and a note of the buyers you expect.
- The session shows ABSO structuring that pool as a PTC, with tranches, credit enhancement and waterfall, and as a direct assignment, with the loan-level file a buying bank would review.
Read more about ABSO pool structuring and securitisation.
Frequently Asked Questions
What is the minimum retention requirement for securitisation in India?
Under the RBI 2021 securitisation directions, the originator retains 5% of the pool where loans have an original maturity of 24 months or less, and 10% where maturity is longer. For residential mortgage-backed securities the requirement is 5% regardless of maturity.
Is credit enhancement allowed in direct assignment?
No. Under the RBI directions on transfer of loan exposures, the seller may not provide credit enhancement or a liquidity facility on a direct assignment. The buyer takes the loans as they are, which is why buyers carry out their own loan-level due diligence.
What is the minimum holding period?
It is the time a lender must hold a loan before selling it. Under the 2021 directions it is 3 months for loans with a tenure of up to 2 years and 6 months for longer loans, and it applies to both securitisation and direct assignment.
What software helps NBFCs structure PTC and direct assignment deals?
ABSO is a securitisation and pool structuring platform. It aggregates eligible loans, builds the loan tape from the underlying documents, models tranches, credit enhancement and the waterfall for a PTC, and produces the loan-level file and diligence pack for a direct assignment.
Glossary
- Pass-Through Certificate
- A securitisation note issued by a trust, through which borrower payments pass to investors.
- Direct Assignment
- The bilateral sale of a pool of loans from one lender to another.
- Minimum Retention Requirement
- The share of a securitised pool the originator must keep.
- Minimum Holding Period
- The time a loan must be held before it can be sold or securitised.
- Loan Tape
- A file listing every loan in a pool with its terms and payment history.
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