The transfer is part of the New Rail Financing Framework (NRFF), which was unveiled by the Singaporean government as part of the 2008 Land Transport Master Plan and first implemented on the Downtown Line (DTL) in 2011.

Under the agreement, SMRT will transfer operating assets including rolling stock and signalling systems for the North-South and East-West Lines (NSEWL), the Circle Line (CCL), and the Bukit Panjang LRT to LTA ownership. The assets included in the transfer had a total net book value of $S 991m ($US 738m) on September 30 2015. LTA will make an initial payment of $S 797m with the balance being paid in annual instalments over three years.

LTA says the transfer will enable it to make more timely investments in capacity expansion and the replacement and upgrading of operating assets, while enabling SMRT Trains to focus on the operation of the network.

LTA will shorten operating contracts from 30-40 years to 15 years under the NRFF with the aim of attracting more companies to bid for the operation of the network and impose new maintenance performance standards with the aim of improving the reliability of the network.

The new license under the NRFF also enables a degree of risk and profit sharing between LTA and SMRT, which according to LTA will make the system more financially sustainable. SMRT describes the current rail financing framework as "unsustainable" and fare margins have declined since the 2012 financial year due to increasing maintenance costs and the need for renewals on the ageing network.

Previously the government was concerned that the operator might be too cautious to invest in additional capacity, asset replacement, or renewal works because it had been left to bear the full financial risk of any capital spending.

On the DTL, where the NRFF is already in effect, LTA owns all infrastructure, stations, depots and operating equipment and makes all decisions on when to enhance or replace these assets.

LTA has been discussing the transfer of SMRT Trains' existing MRT and LRT lines to the NRFF since 2011.

SMRT says it welcomes the shift to an "asset light" model, which will enable it to focus on providing quality service and optimising operations. In order to meet the maintenance performance standards set by LTA, SMRT Trains plans to employ or allocate at least 700 additional maintenance staff, representing a 20% increase in the maintenance workforce.

SMRT will also use part of the proceeds from the sale to reduce its $S 762m debt.