The term “originate to distribute” (OTD), though seldom heard in financial jargon, is increasingly gaining currency, especially in the financial systems of the West. The OTD model is a widely practised variation of traditional financial intermediation. In the traditional model, a financial intermediary (FI), often a bank, originates a loan and holds it on its balance sheet until the loan is amortized and the interest income received. In the OTD model, intermediaries originate loans with the intention of transferring the asset (and its commensurate risk) to another entity. A popular form of OTD is securitization.
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