Webinar on Securitisation and sale of standard assets: The evolving regulatory regime

2 hours of talk and discussion on

12th June, 2020, from 11.30 to 13.30 hrs


Vinod Kothari

On 8th June, 2020, following the recommendations of the Dr Harsh Vardhan working group and Shri T.N. Manoharan working group, the RBI published, for public comments, two separate draft Directions, respectively for securitisation and sale of financial assets. Both the draft Directions comprehensive consolidate, re-write and codify the present regulatory framework pertaining to what has, over time, become a very significant part of Indian’s financial system.

Among other things, the draft Directions, while aligning the capital relief requirements with those of Basel Securitisation Framework, introduce three quantitative tests for eligibility for capital relief. What is more, this part of the Directions will be applicable, once enacted, to existing transactions. Since most of the existing Indian transactions do not have more than 2 tranches, it will interesting to examine whether they will remain eligible for capital relief, and failing which, what will be the capital implications for NBFCs which work on a 15% capital requirement, and have heavily relied on securitisation. The capital relief rules introduce elaborate mathematical risk weight computations.

Also, very importantly, the draft Directions import the Basel and EU concept of STC securitisation, providing conditions which are largely aligned with the Securitisation Framework. STC-qualifying deals will have lower risk weights, and apparently, more appeal with banks being buyers.

In respect of sale of loans, there is a major change in the scope of the requirement which evolves from a legal sale of the loan to loan participation, and, indeed, even unfunded risk participation, thereby ushering a completely new avenue of synthetic transactions.

Also, the definition of “stressed assets” includes special mention accounts too – thereby restricting the framework for “standard assets” only to 0 DPD loans.

Both the new Directions will bring in a major change in the regulatory regime. Securitisation industry stakeholders not only need to understand and imbibe these requirements, but also assimilate their impact on existing business models. There may be major need for systems and computation algorithms. Also, transactions being structured from now until the draft Directions take final shape may still want to comply with the imminent rules.

Vinod Kothari Consultants P Ltd has been a front-runner in securitisation academics, in India, and in the world. Vinod Kothari will be running this 2-hour lecture as a curtain raiser on the draft Directions. Of course, we will be working towards a detailed response to the RBI as well – hence, this meeting will also provide the opportunity to hear stakeholders’ views on the drafts.

Our write ups covering the said topics may be viewed here –

  1. Originated to transfer- new RBI regime on loan sales permits risk transfers;
  2. New regime for securitisation and sale of financial assets;
  3. Comparison of the Draft Securitisation Framework with existing guidelines and committee recommendations;
  4. Comparison of the Draft Framework for sale of loans with existing guidelines and task force recommendations;
  5. Inherent inconsistencies in quantitative conditions for capital relief.

The 2-hour session will allow for interaction to the extent possible on webinar platforms.

Note that we are not intending to discuss the framework for securitisation or sale of stressed assets in this session – we may be planning separate session for that in time to come.

Participation will be by invitation only. Please do express your interest in participating by writing a mail to fintrain@vinodkothari.com

In case of any queries you may contact –

Timothy Lopes

Mobile – 9867093514