Securitisation Reform 2026: SEBI Moves to Align Listed SDI Framework with RBI’s Standard Asset Directions
1. Introduction
On May 4, 2026, the Securities and Exchange Board of India (“SEBI”) issued a Consultation Paper proposing targeted amendments to the SEBI (Issue and Listing of Securitised Debt Instruments and Security Receipts) Regulations, 2008 (the “SDI Regulations”).
The immediate trigger for this paper is a persistent regulatory mismatch. Following SEBI’s last major overhaul of the SDI Regulations — approved by the SEBI Board in December 2024 and notified in May 2025 — market participants flagged specific areas where the SDI Regulations remained out of step with the Reserve Bank of India’s Master Direction on Securitisation of Standard Assets, 2021 (“RBI SSA Directions”), which governs securitisation transactions originated by RBI-regulated entities (“REs“) such as banks, non-banking financial companies (“NBFCs”), and housing finance companies (“HFCs”).
The consequence of this misalignment is material: transactions that are permissible under the RBI’s prudential framework cannot be listed under the SDI Regulations, effectively creating a two-tier market where the listed securitisation segment is more restrictive than the unlisted one. This paper represents SEBI’s effort — based on recommendations from the Corporate Bonds Advisory Committee — to close that gap through five targeted proposals.
2. Background
Securitisation of standard assets by RBI-regulated entities in India operates under a dual-regulator framework. The RBI SSA Directions, issued in September 2021, comprehensively govern the origination, structuring, transfer, and ongoing management of securitisation transactions for entities under RBI’s supervision. SEBI’s SDI Regulations, separately, govern the issue and listing of securitised debt instruments (SDIs) on recognised stock exchanges.
When SEBI amended the SDI Regulations in 2024-25, the intent was to modernise the framework and align it with the RBI SSA Directions. However, post-notification, practitioners identified five specific areas of divergence:
- The SDI Regulations prohibited single-obligor concentration above 25%, blocking listing of single asset securitisations that RBI expressly permits;
- Disclosure and reporting obligations were placed on the originator, even where a third-party servicer is responsible for asset pool management;
- The SPDE governance standard in the SDI Regulations (permitting up to 50% originator-nominee trustees) was more permissive than the RBI standard (capping originator representation at one board member without veto power);
- The SDI Regulations prohibited SPDE-originator same-group transactions, whereas the RBI SSA Directions contain no such blanket prohibition;
- The SDI Regulations permitted SEBI to direct the wind-up of SPDE schemes on trustee registration cancellation — a remedy incompatible with the RBI framework, which does not permit buy-back of transferred assets by the originator except in limited circumstances.
These divergences created a practical barrier: RBI-regulated entities structuring securitisations in compliance with RBI directions faced the prospect of those transactions being ineligible for listing under the SDI Regulations, reducing market depth and investor access. This is the gap the current Consultation Paper seeks to remedy.
3. Analysis of Key Proposals
3.1 Proposal I — Permitting Single Asset Securitisation for RBI-Regulated Entities
Current Regulation 19A(a) of the SDI Regulations provides that no single obligor may constitute more than 25% of the asset pool at the time of issuance. This rule, designed to prevent undue risk concentration, inadvertently bars the listing of single-asset securitisations — transactions backed by a single underlying loan or receivable — even though these are expressly permitted under the RBI SSA Directions for RBI-regulated entities.
SEBI proposes to extend the existing exemption carve-out for RBI-regulated entities (currently available only for the three-year track record conditions under Regulation 19A(d) and (e)) to also cover the 25% concentration cap under Regulation 19A(a). If adopted, this would allow banks, NBFCs, and HFCs originating a single large receivable — such as an infrastructure loan or a large commercial mortgage — to list the resulting SDI without being blocked by the concentration rule.
This is a commercially significant change. Single asset securitisations, particularly of large-ticket infrastructure and real estate assets, are a growing product class globally. The current prohibition has depressed the listed securitisation market for precisely the category of originators — large, prudentially supervised institutions — that are best placed to originate high-quality securitisation paper. The proposed amendment is appropriately calibrated: it creates an RBI-entity-specific carve-out rather than a blanket relaxation, preserving the concentration rule for non-RBI originators where systemic risk considerations may differ.
3.2 Proposal II — Periodic Disclosure Obligations to Follow the Servicer
Under the current SDI Regulations (Regulation 10A and Regulation 11(3)), the obligations to provide quarterly performance reports on the underlying asset pool, to obtain auditor certifications regarding pool disclosures, and to share these with credit rating agencies all rest on the originator. Similarly, trustees are required to call for these reports and certifications from the originator.
The problem is structural: in many securitisation transactions — particularly those following the RBI SSA Directions — the servicer, responsible for day-to-day collection and monitoring of receivables, is a separate entity from the originator. Placing disclosure obligations on the originator, who may not have current operational visibility into pool performance, creates an accuracy and timeliness risk.
SEBI proposes to replace references to ‘originator’ with ‘servicer’ across Regulations 10A and 11(3). The servicer — whether it is the originator itself acting in dual capacity, or a third-party entity — would become the primary obligant for periodic pool reporting, auditor certification, and disclosure to trustees and rating agencies. Trustees would correspondingly be required to call for reports from, and obtain certifications of, the servicer rather than the originator.
This is a sensible alignment with transaction economics. However, it raises a key question that the final regulation will need to address: where the servicer is a third party, who bears ultimate accountability to investors if the servicer fails to discharge these obligations? The paper notes that the originator ‘continues to bear overall responsibility towards investors,’ but does not clarify whether this translates into a joint and several liability position or a residual default obligation. This ambiguity will need to be resolved, particularly for transactions where the servicer is a wholly-owned subsidiary of the originator versus an independent third party.
3.3 Proposal III — SPDE Board Governance: Tighter Originator Representation
Regulation 9(9) of the SDI Regulations currently provides that originator-associated trustees shall not constitute more than half of the Board of the Special Purpose Distinct Entity (SPDE). The RBI SSA Directions adopt a stricter standard: the originator should not have more than one representative on the SPDE Board, and that representative must be without veto power.
SEBI proposes to insert a proviso to Regulation 9(9) specifying that where the originator is an RBI-regulated entity, the originator shall not have more than one representative on the SPDE Board, and that representative shall be without veto power. This aligns the listed securitisation governance standard with RBI’s arms-length principle for RBI-originated transactions.
This is a governance tightening, not a relaxation, and will require existing SPDEs structured under the current SDI framework to review their board composition where the originator is an RBI-regulated entity.
3.4 Proposal IV — Removal of Same-Group Restriction for RBI-Regulated Originators
Regulation 10(3) of the SDI Regulations currently prohibits an SPDE from acquiring debt or receivables from an originator that is part of the same group as the trustee. This provision does not, on its face, address same-group transactions between originator and SPDE — but its practical application, combined with the requirement that the SPDE and originator be separate entities, has led to interpretation issues where same-group originator-SPDE transactions are treated as ineligible for listing.
The RBI SSA Directions do not impose a blanket prohibition on same-group originator-SPDE transactions; their concern is solely that the originator should not exercise control, directly or indirectly, over the SPDE or trustees. SEBI proposes to insert a proviso exempting RBI-regulated entities from the Regulation 10(3) restriction, effectively permitting same-group originator-SPDE securitisation transactions to be listed, provided the originator does not exercise control over the SPDE.
This change has significant structural implications for large banking groups and financial conglomerates that have established or may establish group-level SPDEs for securitisation purposes.
3.5 Proposal V — Replacing Wind-Up with Trustee Substitution on Registration Cancellation
Regulation 45(2) currently provides that upon suspension or cancellation of a trustee’s registration, SEBI may direct the ‘winding up of schemes’ of the SPDE — defined as liquidation of the asset pool and repayment of proceeds to investors. This remedy is fundamentally incompatible with the RBI’s securitisation framework, which does not permit the originator to buy back transferred assets (a practical consequence of asset pool liquidation) except in very limited circumstances. Requiring wind-up of a listed securitisation scheme on trustee default would therefore force a regulatory breach of the RBI SSA Directions.
SEBI proposes to replace the wind-up remedy with a trustee substitution remedy: upon suspension or cancellation of a trustee’s registration, SEBI may direct the appointment of a new trustee in its place, within such period and in such manner as directed. The existing explanation defining ‘winding up of schemes’ would be deleted as inconsistent.
This is a practically essential change. Wind-up of a securitisation trust mid-life is disruptive to investors who have acquired the SDIs and destructive to the credit quality of the underlying pool. Trustee substitution is the standard remedy in well-developed securitisation markets.
4. Way Forward
All five proposals are directionally correct and reflect the kind of targeted, inter-regulatory coordination that the securitisation market has needed since the RBI SSA Directions were issued in 2021. The underlying policy objective — enabling RBI-regulated entities to access the listed SDI market on terms consistent with their RBI compliance posture — is sound and should improve market depth and pricing efficiency in the listed securitisation segment.
That said, the Consultation Paper is deliberately high-level. The actual regulatory text, when finalised, will need to address several ambiguities that practitioners will encounter immediately on implementation, some of which are as follows:
- Servicer Accountability Gap: The shift of disclosure obligations to the servicer (Proposal II) is operationally correct but leaves unresolved the question of residual originator liability where a third-party servicer fails to report accurately or on time. Investors and rating agencies will need clear contractual and regulatory backstops.
- Same-Group Control Standard: The removal of the same-group restriction for RBI-regulated entities (Proposal IV) must be accompanied by robust ‘no-control’ verification mechanisms. Without clear guidance on what constitutes ‘control’ in a group securitisation context, there is a risk of regulatory arbitrage — entities structuring transactions through group SPDEs in ways that, in substance, preserve originator control.
- Single Asset Investor Disclosure Standard: The exemption under Proposal I for single asset securitisation does not explicitly address credit rating and disclosure requirements that would be expected for such concentrated structures. Investors in single-asset SDIs require more granular due diligence than those in pool-based structures.
This Capital Markets update is intended for general guidance only and does not constitute legal advice. For more information, please reach out to Shubham Sharma at 2636@cnlu.ac.in.
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