Indian Securitisation Awards 2023
| Details of the 11th Securitisation Summit: https://vinodkothari.com/secsummit |
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Open in new tab Taxation in Securitisation: A judicial overview
-Anirudh Grover, Executive | finserv@vinodkothari.com
Introduction
Securitization transactions in India post the pandemic has seen significant improvement with volumes growing by 70% to Rs. 73000 crores in FY 2023 compared to Rs. 43000 crores in FY 2022.[1] This growth was also highlighted in one of our recent write up wherein it can be seen from the data laid down that despite the global slowdown in the world economy on account of the pandemic, the volume of securitization transactions in India gained a lot of popularity. Given the impetus of this fundraising mode, it is important to have a vibrant securitization market. This can be only achieved if the governing framework with respect to taxation does not impose an additional taxation burden on the parties. Through this article, the writer will be reviewing the stance of various courts by highlighting the principles with respect to the taxation of the parties involved in a securitization framework i.e. Originator, Special Purpose Vehicle(‘SPV’), and the Investors. For a better understanding of the framework of securitization, the readers can also refer to our Article on Securitization: A Primer.
Read more →Full-day Workshop on Securitisation, Transfer of Loans and Co-lending
| Register here: https://forms.gle/6x1GrZzRQoFzSVRm8 |
We are also organising the 11th edition of the Securitisation Summit, an annual coming together of stakeholders in structured finance industry in India to be held on 19th May, 2023 i.e. the day after this workshop. You are requested to register for both – the workshop and the 11th Securitisation Summit for a refresher on the securitisation market in India. Read more: https://vinodkothari.com/secsummit/
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Securitisation: Indian market grows amidst global volume contraction
Timothy Lopes, Manager
Global Securitisation Volumes, 2022
The global securitisation market in 2022[1] saw a decline in volumes as compared to record issuance volumes seen in the year 2021. The decline was mainly driven by 24% year-on-year decline in volumes in the United States, obviously because of inflation, general economic conditions and low level of business confidence, coupled with supply chain disruptions and uncertainty caused by the Russia-Ukraine conflict[2].
Read more →SVB Collapse: Focus on risk of MBS investing
-Vinod Kothari and Timothy Lopes
It all started after Silicon Valley Bank (‘SVB’) announced its Q1’23 Mid quarter update[1], revealing that it intended to raise about USD 2.25 billion of capital owing to the fact that it had sold its USD 21 billion ‘Available for Sale’ (‘AFS’) securities portfolio, which consisted of US treasuries and Mortgage Backed Securities (‘MBS’) and suffered a USD 1.8 billion loss.
This caused a run on its deposits that triggered the quick collapse of SVB just two days after this announcement, which is being called the ‘largest bank failure since the global financial crisis’[2]. On March 10, 2023, the SVB Financial Group announced[3] that its wholly owned subsidiary SVB was closed by the California Department of Financial Protection and Innovation and placed under Federal Deposit Insurance Corporation (‘FDIC’) receivership.
Part of the blame is being placed on the investment decisions made by SVB in long term MBS. The Financial Times[4] talks about how crazy it was that SVB did not hedge its Held-to-Maturity (‘HTM’) portfolio which comprised of very long term agency MBS maturing in 10 years or more.
Read more →National financial information repository: One more or one for all?
– Lovish Jain, Executive | lovish@vinodkothari.com
Some days ago, Mr. Vinod Kothari had commented on a LinkedIn post :
“Do we realise how many places does a lender (NBFC, Bank) register information about a loan? There are 4 credit information companies (such as CIBIL) where the credit data, including performance history, is uploaded. If the exposure is Rs 5 crores or above, in the aggregate over the banking system, information goes on CRILC too.
RBI has recently written to NBFCs reminding them of the obligation to register details with NeSL, an information utility under IBC, irrespective of whether the provisions of Code apply (for example in case of individuals), or whether the lender in question is at all contemplating resorting to IBC as a remedy (for example, consumer loans).
If the loan is a secured loan, the details need to be filed with CERSAI. If the secured loan borrower is a company, details need to be filed with RoC too. If the security interest is on immovable property, one needs to file particulars with land registry. If the security interest is on motor vehicles, the hypothecation is registered with Vahan portal too.
Read more →Securitisation of stressed loans: Opportunities and structures
Comments on RBI’s Discussion Paper on Securitisation of Stressed Assets Framework (SSAF) dated January 25, 2023
Timothy Lopes, Manager | Vinod Kothari Consultants Pvt. Ltd.
Background
At present, in India, there exists a framework for securitisation of standard assets only. in September, 2021 the RBI issued the ‘Master Direction – Reserve Bank of India (Securitisation of Standard Assets) Directions, 2021’ (‘SSA Directions’)[1], which deals with standard asset securitisation. Under the SSA Directions, the definition of standard assets does not include non-performing loans, i.e., only those assets with a delinquency up to 89 days, would qualify for securitisation under the SSA directions.
For assets that turn non-performing, i.e., 89+ days-past-due (‘DPD’), including those that retain the classification as the borrower has not been able to clear all his past arrears, the same can, at present, be sold under the Master Direction – Reserve Bank of India (Transfer of Loan Exposures) Directions, 2021 (‘TLE Directions’)[2], which has a framework for sale of stressed assets (which includes non-performing assets). Technically, there is a process of “securitisation” of non-performing loans (‘NPLs’), by issuing “security receipts” (‘SRs’) against the same; however, the framework for issue and investing in SRs is quite different, and is normally not captured as a part of securitisation in the industry parlance[3].
Assets sold through the TLE route require a complete arm’s length sale, without any credit support from the seller and there is typically no tranching. This results in substantial haircuts on these stressed loan pools. Further, most of the NPLs that face a problem in the current scenario are retail loans or re-performing loans (see discussion on re-performing loans later). These retail pools are not normally sold under the ARC route since ARCs lack the capability in this specific asset class and are more suited towards wholesale transactions.
Read more →11th Securitisation Summit | Sponsorship Proposal
Details of the 11th Securitisation Summit – https://vinodkothari.com/secsummit/
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Post-event report of the 10th Securitisation Summit – https://vinodkothari.com/2022/05/key-takeaways-10th-securitisation-summit-may-27-2022-the-lalit-mumbai/
For queries regarding participation, partnership or anything else, reach us at: summit@vinodkothari.com / fintrain@vinodkothari.com
Full Day Workshop on Securitisation and Transfer of Loans
| Register here: https://forms.gle/g8XMdjhRUBuWd2Pz7 |
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Our writeups on the topic:
- Video Lecture on basics of Securitisation
- Securitisation Primer
- Evolution of securitisation – Genesis of MBS
- Global Securitisation Markets in 2021: A Robust Year for Structured Finance
- Securitisation Glossary
- After 15 years: New Securitisation regulatory framework takes effect
- One stop RBI norms on transfer of loan exposures
- Loan Participations: The Rising Star of Loan Markets
- FAQs on Securitisation of Standard Assets
- FAQs on Transfer of Loan Exposure
- Legal Issues in Securitization
- Has the cover fallen off Covered Bonds?
- Security Token Offerings & their Application to Structured Finance
- Resurgence of synthetic securitisations: Capital-relief driven transactions scale new peaks
- Understanding the budding concept of green securitization
2022 in retrospect: Regulatory activity in the financial sector
– Vinod Kothari | finserv@vinodkothari.com
It has been a brisk year in terms of activity – a busy regulator kept all regulated entities busier. This year marked the initiation of a new SBR framework for NBFCs – hence there was a lot of buzz in terms of understanding the new regulatory framework. The names of 16 Upper layer entities were declared by the RBI – consisting of 5 HFCs, 10 NBFC-ICCs, one CIC[1]. As is the design, UL entities are treated at par with banks in terms of regulatory intensity –hence, there is a LEF (large exposure framework), differential provisioning norms in case of standard assets, CET-1 capital requirement, mandatory listing etc.
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