Regulatory framework for Online Bond Platform

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– Abhirup Ghosh, Principal Advisor | abhirup@vinodkothari.com

Regulatory Framework for Online Bond Platform

Securities and Exchange Board of India (‘SEBI’) on November 14, 2022, notified the circular, ‘Registration and regulatory framework for Online Bond Platform Providers’[1] (‘Circular’) for regulating online bond trading platforms, applicable immediately. The notification comes in the backdrop of several unregulated online platforms offering services relating to dealing and transfer of listed/ unlisted securities between investors (mostly non-institutional). On the path to introduce the regulatory framework, the SEBI first issued Consultation Paper on Online Bond Trading Platforms – Proposed Regulatory Framework on July 21, 2022[2] (‘Consultation Paper’), a detailed write up on which can be found in another article named, ‘SEBI proposes to regulate private debt platforms’.[3] After gathering comments from public, the SEBI issued a couple of notifications – the first one is SEBI (Issue and Listing of Non-Convertible Securities) (Second Amendment) Regulations, 2022 (‘Amendment Regulation’) on November 09, 2022[4] to bar the intermediaries from facilitating transactions in listed debt securities without a stock broker license, and second one is the aforementioned Circular, which is the subject matter of discussion in this case.

This write-up tries to discuss the implications of the Circular, but before getting into that discussion, it is important to first understand the meaning and scope of the term, “online bond trading platform”.

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Workshop on Large Corporate Borrowers

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Click here to register for the workshop- https://forms.gle/mmRSswBTjX79SR8c7
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CERSAI beyond SARFAESI – The multi-faceted effects of security interest registration

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– Sikha Bansal and Anirudh Grover | finserv@vinodkothari.com

Introduction

The rights of secured creditors are spread across various laws: common law, Companies Act, Insolvency and Bankruptcy Code (IBC) and the SARFAESI Act. In equal measure, the preconditions which are requisite to assert these rights are also spread over those very laws. 

It is lamentable that the security interest registration regime in India is fragmented, without any obvious sense of purpose or direction. This was discussed in our previous article Fragmented Framework for Perfection of Security Interest[1].

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Full Day Workshop on Partnering in lending (Mumbai)

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Loan sourcing, co-lending, transfer of loans, securitisation

Please note that registration for the workshop is closed, thank you for the overwhelming support! Do express your interests by filling this form: https://forms.gle/qoUwx99aV1acELSp6
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Details of our workshop in Bengaluru: https://vinodkothari.com/2022/12/full-day-workshop-on-partnering-in-lending/

Our recent write-ups on the topic:

Financial Services- https://vinodkothari.com/category/financial-services

Digital Lending- https://vinodkothari.com/?s=digital+lending

The sale of season: Holding period requirements for assignments and securitisation

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– Team Finserv | finserv@vinodkothari.com

Any sale or assignment or transfer, including securitisation, of loans is subject to a minimum seasoning with the originator. Under the extant regulatory provisions, such requirement is referred to as ‘Minimum Holding Period’ (MHP), which means the minimum period for which the originator should have held the loan exposures before the same is transferred to the transferee or Special Purpose Entity (SPE), as the case may be. This serves several purposes: that the loan was not originated for sale, the originator has had some equity in the loans, and that there is a benefit of hindsight of performance.

MHP requirements have always been a part of the regulations in India. However, on December 5, 2022, the Reserve Bank of India (RBI) made certain amendments to the Master Direction – Reserve Bank of India (Transfer of Loan Exposures) Directions, 2021[1] (‘TLE Directions’) as well as the Master Direction – Reserve Bank of India (Securitisation of Standard Assets) Directions, 2021[2] (‘SSA Directions’). Among the other changes, there was a change in the MHP provisions; this change may have a significant impact on future transactions. 

This write-up intends to clarify the position with respect to the computation of MHP for different types of loans under TLE Directions as well as SSA Directions.

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Voluntary Liquidation under IBC

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– Team Resolution | resolution@vinodkothari.com

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RBI amends TLE Directions

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– Team Finserv | finserv@vinodkothari.com

The Reserve Bank of India (RBI) made certain amendments to the Master Direction – Reserve Bank of India (Transfer of Loan Exposures) Directions, 2021 (‘TLE Directions’) on December 05, 2022. The long-awaited welcome move of allowing ARCs to acquire loans falling in 1-60 DPD as well is being well appreciated. Some of the changes seem to be creating a confusion; say not allowing foreign branches of Indian banks to acquire defaulted loans; while others, seem to be providing more clarity; such as clarifying that registration of security interest for the purpose of computing MHP shall mean registration of security interest with CERSAI only.

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Three significant changes in Securitisation Directions

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Loans with less than 1 year to go cannot be securitised; Minimum holding period norms tweaked, may impact home loan securitisation

– Vinod Kothari | finserv@vinodkothari.com

On December 5, 2022, the RBI silently made some significant changes and updated the RBI (Securitisation of Standard Assets) Directions, 2021 (‘SSA Directions’). It is difficult to understand if these amendments are pursuant to some consultation, or feedback gathered from supervisory experience. The three significant changes seem to be mutually disconnected, though some of the amendments are related to the amendments made, on the same date, to the RBI (Transfer of Loan Exposures) Directions, 2021 (‘TLE Directions’) too.

We deal with the three amendments, and their implications, below:

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