Panel on Corporate Loans & Securitization

BE/RBINOTE/31/2019

RBI

Reserve Bank of India, has set up a Task Force in the road to develop secondary market for Corporate Loans and also brought out a committee on the development of housing finance securitisation market.  Few details about this committee are as follows:

  1. The Task Force has six members and will be headed by T.N. Manoharan, Chairman, Canara Bank and the Committee also which also has six members will be headed by Harsh Vardhan, Senior Advisor, Bain & Co.,
  2. RBI report adds that the country’s secondary loan market is largely restricted to asset reconstruction companies and ad hoc sale to other lenders, which includes banks, and no specific mechanism is in place, to develop the market further.
  3. A developed secondary market for debt is expected to help in bringing out a transparency in the search of a Traded Debt.
  4. Also the Task Force is advised to provide necessary recommendations by August 2019 in order to create a loan contract registry and to remove information irregularities that exists between the buyers and the sellers.
  5. Regarding the mortgage securitization the RBI adds that this market is mainly controlled by direct assignments among a limited group of market participants due to different structural factors, which have influence on both demand and supply sides, let apart there is also some prudential, legal, tax and accounting problems.
  6. The panel has also been advised to examine the role of various counterparties, in the securitisation process and provide their ideas, which includes
    • Servicers
    • Trustees
    • Rating Agencies
  7. More so, the Panel would also make suggestions by August this year, on the actions which could facilitate secondary market trading in mortgage securitisation instruments like
    1. Broadening investor base and
    2. Strengthening market infrastructure.

Author: Admin Bankedge

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