The Reserve Bank of India has, today, placed on its website the draft Revised Guidelines on Securitisation Transactions for public comments.

In the light of developments in the domestic and international financial markets, Reserve Bank had reviewed the extant guidelines on securitisation of standard assets and placed the draft guidelines on minimum lock-in period/Minimum Holding Period (MHP) and Minimum Retention Requirements (MRR) for Indian banks on its website on April 19, 2010 for feedback from the market participants. The draft guidelines were accompanied by a discussion paper titled ‘Emerging Trends in Regulation and Supervision of Securitisation Activities of Banks’. The discussion paper mentioned inter alia that Reserve Bank would also consider laying down specific regulatory norms for transactions involving transfer of loans through direct assignment between banks as also between banks and other entities.

The feedback received from banks and other market participants on the draft guidelines has been examined. In the meantime, some international jurisdictions have also finalized regulatory norms on Minimum Retention Requirement, due diligence required to be carried out by investors and disclosures to be made by the originators of securitized loans. In addition, existing regulatory norms on booking of profit on transfer of assets, reset of credit enhancements and transactions involving transfer of loans through direct assignment have been reviewed. Since the draft guidelines issued in April 2010 have been considerably revised to reflect all the aforesaid changes, it is proposed to provide another opportunity to banks and other market participants to offer their comments on the proposed guidelines. The revised draft guidelines are given in Annex.

Comments on the draft guidelines may be forwarded to the Chief General Manager-in-Charge, Department of Banking Operations and Development, Reserve Bank of India, Central Office Building, 12th Floor, Shahid Bhagat Singh Marg, Fort, Mumbai – 400001 or emailed on cgmicdbodco@rbi.org.in, latest by October 14, 2011.

____________________________________________________________

Revisions to the Guidelines on Securitisation Transactions

RBI/2011-12
DBOD.No.BP./21.04.177/2011-12,

Dated- September 27, 2011

Revisions to the Guidelines on Securitisation Transactions

Please refer to paragraph 161 of the Second Quarter Review of the Monetary Policy for the year 2009-10 announced on October 27, 2009 (copy of the paragraphs enclosed), and the Draft Guidelines on Securitisation Transactions and a Discussion Paper on the subject, issued subsequently on April 19, 2010. The Draft Guidelines proposed to stipulate minimum retention requirement (MRR) and minimum holding period (MHP) for securitisation transactions. The Draft Guidelines have been reviewed taking into account the feedback received and further international developments on the subject during the intervening period. The revised guidelines are furnished in Annex. These guidelines also cover prudential treatment of transfer of assets through direct assignment of cash flows and the underlying securities, if any.

2. The guidelines are organised in three Sections. Section A contains the provisions relating to securitisation of assets. Section B contains stipulations regarding transfer of standard assets through direct assignment of cash flows. Section C enumerates the securitisation transactions which are currently not permissible in India.

3. All other guidelines on securitisation of assets contained in our Master Circular on New Capital Adequacy Framework dated July 1, 2011 including that in Annex 7 of the circular remain unchanged.

Yours faithfully,

(Deepak Singhal)
Chief General Manager-in-Charge

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