A Special Purpose Vehicle (SPV) or Special Purpose Entities (SPE) are generally formed for a special purpose. Elucidate.

Yes, this is true that Special Purpose Vehicle (SPV) or Special Purpose Entities (SPE) are generally formed for special purpose as stated below: The main purpose of a Special-Purpose Vehicle is to allow the parent company to make highly leveraged or speculative investments without endangering the entire company. If any SPV goes bankrupt, it will not affect the parent company. SPVs are mostly formed to raise funds from the market or when Government Regulations specify creation of a separate vehicle for carrying out any specified activity. SPVs are created by a parent company to implement large scale projects and operations of an SPV are legally limited to specific assets. SPVs are also formed by bank and financial institution for Securitisation. The total assets of banks or financial institution mainly comprise of loans and receivables along with their future cash flow to a separate entity, which may be formed for a specific purpose. The SPV is allowed to raise debt which will be backed by these receivables and their future cash flows. The difference between the incomes received from these receivables and cost of servicing the debt will be profit/earning of the SPV. By securitization through SPV the risk involved in this activity is separated from the general business of the bank. Government also forms SPVs for special projects. Purpose behind formation of SPV is to get easy finance and various approvals from State and Central Government at many levels and on completion of projects, it provides easy exit route for Government.