Brief Overview:
A Discussion Paper on Securitisation of Stressed Assets (“Discussion Paper”), detailing relevant contours of the proposed framework on Securitisation of Stressed Assets has been released by RBI.
Technical Details:
The Discussion paper invites comments on nine relevant areas broadly covering:
1) Asset universe;
2) Asset eligibility;
3) Minimum risk retention;
4) Regulatory framework for special purpose entity and resolution manager;
5) Access to finance for resolution manager;
6) Capital treatment;
7) Due diligence;
8) Credit enhancement; and
9) Valuation of securitization notes.
Currently the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 provides for securitisation of Non-Performing Assets (“NPAs”) through an Asset Reconstruction Company. No corresponding mechanism for securitisation of NPAs through the special purpose entity route exists.
The Discussion Paper aims to provide for a framework that is structurally aligned with the framework for securitisation of standard assets.
*Comments on the Discussion Paper may be submitted by 28th February 2023 to The Chief General Manager, Credit Risk Group, Department of Regulation, Central Office, Reserve Bank of India.
For further details, please see:
https://www.rbi.org.in/Scripts/PublicationsView.aspx?id=21728
For any queries / clarifications, please feel free to ping us and we will be happy to chat:
Mr. Ankit Sinha (ankit.sinha@jclex.com)
Mr. Saurabh Sharma (saurabh.sharma@jclex.com)
Ms. Rupul Jhanjee (rupul.jhanjee@jclex.com)
