The Reserve Bank of India (RBI) is proposing a new set of guidelines that would address the differential between mortgage loans and other loan securitization, simplifying regulations. In two draft papers released on its website the central bank also proposed to bridge the difference between the sale of loans and assignment of receivables which lenders use to improve their cash flows while keeping the loans on their books.
In the draft guidelines, RBI said it has modified the definition of securitization to include single asset securities against the multiple asset securities allowed in the existing norms.
Loans even purchased from other lenders can be securitized- which is a change from the current rules.
Market participants have time till June 30 to give their comments and suggestions to RBI on these guidelines.
Standard assets can also be sold through a loan participation contract either by funded or risk participation. However stressed loans can only be sold through an assignment basis or through a slump sale.
Lenders have also been given a free hand to decide their own price discovery process. Also, stressed assets can now be sold to any entity that is permitted to take on loan exposures by its statutory or regulatory framework.