RBI’s proposed rule revisions to slow Indian securitisation

Author: | Published: 13 Oct 2011

The Reserve Bank of India’s (RBI) plans to amend its securitisation transaction guidelines have been criticised by the domestic banking sector as potentially harmful to the market. But lawyers argue that can only be a good thing.

RBI released draft amendments to its securitisation transactions rules on September 27, following submission of feedback from banks and other market participants on the original draft guidelines released in April 2010.

The move aims to develop a healthy securitisation market in India by preventing issuers looking for short-term profit, from originating securitised loans and selling them off immediately to other institutions without proper due diligence on the risk of underlying debts.

Key changes include the stipulation that the minimum holding period (MHP) for loans with monthly payments and an original maturity of up to two...