Securitisation 2020: Trends And Developments In India

The Development of Securitisation in India

When undertaken by banks, financial institutions and non-banking financial companies ("NBFCs"), securitisation in India is regulated and governed by the Reserve Bank of India ("RBI") under the provisions of the 2006 and 2012 Guidelines on Securitisation of Standard Assets ("RBI Guidelines") for standard assets and by the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 ("SARFAESI Act") for stressed financial assets.

While the term "securitisation" is defined under each of these regulatory regimes, both regimes envisage securitisation as a ring-fenced and bankruptcy-remote true sale of financial assets (or a pool of such assets) in return for immediate cash payment. Under the true sale mechanism, the assets move from the balance sheet of the originator to the balance sheet of a special purpose vehicle ("SPV") or asset reconstruction company, and are pooled, sub-divided,