The Reserve Bank of India recently released draft framework for “Sale of Loan Exposures” and “Securitization of Standard Assets”.
Highlights
- The guidelines issued are applicable to Scheduled Commercial Banks.
- This includes All India Financial Institutions such as EXIM Bank, NABARD, Non-Banking Financial Companies.
- The guidelines have also included recommendations of Committee on Development of Housing Finance Securitization Market in India that was chaired by Dr Harsh Vardhan.
- Also, the guidelines included the recommendations made by the Task Force set up on the Development of Secondary Market for Corporate Loans.
- Both the Committee and the Task Force were set up by the Reserve Bank of India.
Key Features of the Guidelines
- The Guidelines has proposed Two Capital Measurement approach. This includes Securitisation External Ratings based approach and Securitisation Standardised Approach.
- Simple Transparent Comparable Securitisation has been prescribed to define preferential capital treatment.
- The new guidelines allowed Securitisation of exposures that are purchased from other lenders
- The Stressed Assets under the new guidelines shall be sold only through novation and assignment.
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