Revisions to the Guidelines on Securitisation Transactions

RBI//2012-13/170

DNBS. PD. No. 301/3.10.01/2012-13

August 21, 2012

All NBFCs excluding Primary Dealers (PDs)

Dear Sir,

Revisions to the Guidelines on Securitisation Transactions

Detailed Guidelines on Securitisation of Standard Assets were issued to NBFCs vide Circular DBOD.NO.BP.BC.60/21.04.048/2005-06 dated February 01, 2006.

2. In order to prevent unhealthy practices surrounding securitization viz; origination of loans for the sole purpose of securitization and in order to align the interest of the originator with that of the investors and with a view to redistribute credit risk to a wide spectrum of investors, it was felt necessary that originators should retain a portion of each securitization originated and ensure more effective screening of loans. In addition, a minimum period of retention of loans prior to securitization was also considered desirable, to give comfort to the investors regarding the due diligence exercised by the originator. Keeping in view the above objectives, draft guidelines for banks and NBFCs were formulated and placed in public domain for comments in April 2010 and June 2010 respectively. The Bank vide its circular DBOD.No.BP.BC-103/21.04.177/2011-12 dated May 07, 2012 has issued the final guidelines in this regard to banks. The Guidelines also cover the regulatory aspects on direct assignment of loans. It has been decided to extend the guidelines to NBFCs also as given in the annex.

3. The guidelines are organised in three Sections. Section A contains the provisions relating to securitisation of assets. A separate circular would be issued in due course on reset of credit enhancements in case of securitisation transactions. 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.

4. All other guidelines on securitisation of standard assets remain unchanged.

Yours faithfully,

(Uma Subramaniam)

Chief General Manager-in-Charge

For Annex check the attached file