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RBI to issue final securitisation norms soon

The Reserve Bank of India (RBI) will issue the final guidelines on securitisation in a day or two. The move is aimed at ensuring that standard assets securitised constitute a true sale and an arm’s length is maintained between the originating bank and the special purpose vehicle (SPV) to which the assets are transferred.

The draft guidelines were issued in April 2005 and the central bank since then received a lot of suggestions on the regulatory framework for securitisation of standard assets, RBI deputy governor V Leeladhar said at a seminar organised by Indian Merchants’ Chamber and Indian Banks’ Association.

The draft guidelines had said that for a transaction to be treated as securitisation, it must follow a two-stage process.

In the first stage, there should be pooling and transferring of assets to a bankruptcy remote vehicle (SPV) and in the second stage, effect repackaging and selling of the security interests representing claims on incoming cash flows from the pool of assets to the third party investors.

For enabling the transferred assets to be removed from the balance sheet of the seller in a securitisation structure, the isolation of assets or ‘true sale’ from the seller or originator to the SPV is an essential prerequisite.

India has a fast-developing securitisation market. Financial assets ranging from credit card receivables, home loan receivables, hire purchase receivables and corporate debt have often been securitised.

ICICI Bank and Citibank are the active originators of securitised assets. ICICI Bank has securitised assets worth over Rs 11,000 crore in the nine months ended December 30 2005.


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