Press Information Bureau

Government of India

Ministry of Finance

29-November-2012 17:43 IST

RBI has informed that to prevent unhealthy practices surrounding securitization and assignment of loans and to allow for redistribution of credit risk to a wide spectrum of institutions, it has issued revised guidelines on ‘securitization transactions’ on August 21, 2012 which inter-alia provide the following:

I) Mandatory retention of a portion of each Securitization by the originator to ensure more effective screening of loans;

II) Minimum period of retention of loans prior to Securitization to give comfort to investors regarding due-diligence exercised by the originator;

III) Stipulations regarding transfer of standard assets through final assignment of cash flows and the underlying securities and

IV) Disclosure Norms.

RBI has placed the detailed guideline in public domain on its website www.rbi.org.in.

This was stated by the Minister of State for Finance, Shri Namo Narain Meena in written reply to a question in the Rajya Sabha today.

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DSM/RS/bs

Loan securitization risk retention required to align originator incentives and strengthen investor confidence in securitized assets. Revised regulatory guidelines require NBFCs to retain a portion of each securitization to ensure originator risk retention and strengthen screening; they also mandate a minimum holding period before securitization, set conditions for final assignment of cash flows and underlying securities, and establish disclosure norms to enable redistribution of credit risk and improve transparency.