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SEBI Securitisation Regulations: Track Record, Risk retention and Investment size among several new requirements

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– Dayita Kanodia (finserv@vinodkothari.com)

Requirements to apply to all listed issuances, from financial and non-financial issuers

Below are the major highlights of the SDI amendment regulations:

SEBI on May 5, 2025 has issued the SEBI (Issue and Listing of Securitised Debt Instruments and Security Receipts) (Amendment) Regulations. 2025. It may be noted that the SDI Regulations, was first notified on 26th May, 2008, after public consultation on the proposed regulatory structure with respect to public offer and listing of SDIs, following the amendments made in the SCRA. The Regulations, originally referred to as the SEBI (Public Offer and Listing of Securitised Debt Instruments) Regulations, 2008, were subsequently renamed as SEBI (Issue and Listing of Securitised Debt Instruments and Security Receipts) Regulations, 2008, w.e.f. 26th June, 2018.

In order to ensure that the regulatory framework remains in accordance with the  recent developments in the securitisation market, a working group chaired by Mr. Vinod Kothari was formed to suggest changes to the 2008 SDI regulations. Based on the suggestions of the working group and deliberations of SEBI with RBI, the amendment has been issued. The amendment primarily aims to align the SEBI norms for Securitised Debt Instruments (SDIs) with that of the RBI SSA Directions which only applies in case of securitisations undertaken by RBI regulated entities.

It can be said that these amendments are not in conflict with the SSA Directions and therefore for financial sector entities while there may be some additional compliance requirements if the securitisation notes are listed, there are as such no pain points which discourages such entities to go for listing. Further, certain requirements such as MRR, MHP, minimum ticket size have only been mandated for public issue of SDIs and therefore are not applicable in case of privately placed SDIs.

This article discusses the major amendments in the SDI Framework.

Major Changes

Definition of debt

The amendment makes the following changes to the definition of debt:

  1. All financial assets now covered – In order to align the SDI Regulations with the RBI SSA Directions, the definition of ‘debt’ has been amended to cover all financial assets as permitted to be originated by an RBI regulated originator. Further, this is subject to the such classes of assets and receivables as are permissible under the RBI Directions. Note that the RBI SSA Directions does not provide a definition of ‘debt’ or ‘receivables’, however, provides a negative list of assets that cannot be securitised under Para 6(d) of the RBI SSA Directions.
  2. Equipment leasing receivables, rental receivables now covered under the definition of debt.
  3. Listed debt securities – The explicit mention of ‘listed’ debt securities may remove the ambiguity with regard to whether SDIs can be issued backed by underlying unlisted debt securities, and limits the same to only listed debt securities. The second proviso to the definition further clarifies that unlisted debt securities are not permitted as an underlying for the SDIs.
  4. Trade receivables (arising from bills or invoices duly accepted by the obligors) – As regards securitisation of trade receivables, acceptance of bills or invoices is a pre-condition for eligibility of the same as a debt under the SDI Regulations.

‘Acceptance’, in literal terms, would mean acknowledgement of the existence of receivables. Under the Negotiable Instruments Act, 1881, ‘acceptance’ is not defined, however, ‘acceptor’ is defined to mean the drawee of a bill having signed his assent upon the bill, and delivered the same, or given notice of such signing to the holder or to some person on his behalf.

Note that a bill or invoice may either be a hard copy or in digital form. In the context of digital bill, acceptance through signature is not possible; therefore, existence of no disputes indicating a non-acceptance, should be considered as a valid acceptance.

  1. Such Debt/ receivable including sustainable SDIs as may be notified by SEBI – In addition to the forms of debts covered under the SDI Regulations, powers have been reserved with SEBI to specify other forms or nature of debt/ receivable as may be covered under the aforesaid definition. Further, the clause explicitly refers to sustainable SDIs, for which a consultation had been initiated by SEBI in August 2024[1].

Conditions governing securitisation

SEBI has mandated the following conditions to be met for securitisation under the SDI Framework:

  1. No single obligor to constitute more than 25% of the asset pool – This condition has been mandated with a view to ensure appropriate diversification of the asset pool so that risk is not concentrated with only a few obligors. However, it may be noted here that the RBI regulations does not currently prescribe any such obligor concentration condition. Only in case of Simple, Transparent and Comparable securitisation transactions, there is a mandate requiring a maximum concentration of 2% of the pool for each obligor.

However, SEBI has retained the power to relax this condition. In our view, this may be relaxed by SEBI for RBI regulated entities considering that RBI does not prescribe for any such condition.

  1. All assets to be homogenous – This is yet another provision which is only required by RBI in case of STC transactions. However, even in the context of RBI regulations, what exactly constitutes a homogenous asset is mostly a subjective test. SEBI has defined homogenous to mean same or similar risk or return profile arising from the proposed underlying for a securitised debt instrument. This has made the test of homogeneity even more subjective. For the purpose of determining homogeneity, reference can be made to the homogeneity parameters laid out by RBI in case of Simple, Transparent and Comparable securitization transactions.
  2. SDIs will need to be fully paid up-  The SDIs will need to be fully paid up, i.e., partly paid up SDIs cannot be securitised. 
  3. Originators to have a track record of 3 financial years: Originators should be in the same business of originating the receivables being securitised for a period of at least three financial years. This restricts new entities from securitising their receivables. However, this condition in our view should only apply to business entities other than business entities, complying with this condition does not seem feasible. 
  4. Obligors to have a track record of 3 financial years– The intent behind this seems to to reduce the risk associated with the transaction as the obligors having a track record in the same operations which resulted in the creation of receivables being securitized. However, this condition cannot be met in most types of future flow securitisation transactions such as toll road receivables and receivables from music royalties.

SEBI has made it clear that the last two conditions of maintenance of track record of 3 years for originators and obligors will not apply in case of transactions where the originators is an RBI regulated entity.

Amendments only applicable in case of public issue of SDIs

The following amendments will only be applicable if the SDIs are issued to the public. Here, it may be noted that the maximum number of investors in case of private placement of SDIs is limited to 50.

Minimum Ticket Size

The Erstwhile SDI Regulations did not provide for any minimum ticket size. However, with a view to align the SDI regulations with that of RBI’s SSA Direction, a minimum ticket size of Rs. 1 crore has been mandated in case of originators which are RBI regulated as well as of non-RBI regulated entities. It may however be noted that the minimum ticket size requirement has only been introduced in case of public offer of SDIs. Further, in cases with SDIs having listed securities as underlying, the minimum ticket size shall be the face value of such listed security.

Securitisation is generally perceived as a sophisticated and complex structure and therefore the regulators are not comfortable in making the same available to the retail investors. Accordingly, a minimum ticket size  of Rs. 1 Crore has been mandated for public issue of SDIs. In case of privately placed SDIs, the issuer will therefore have the discretion to decide on the minimum ticket size. However, since the RBI also mandates a minimum ticket size of Rs. 1 Crore, financial sector entities will need to adhere to the same.

Here, it is also important to note that in case of public issue of SDIs with respect to originators not regulated by RBI, SEBI has made it clear that the minimum ticket size of Rs. 1 Crore should be seen both at initial subscription as well as at the time of subsequent transfers of SDIs. However, nothing has been said for subsequent transfers in cases where the originator is a RBI regulated entity. The RBI SSA Directions also requires such minimum ticket size of Rs. 1 Crore to be seen only at the time of initial subscription. This in many cases led to the securitisation notes being broken down into smaller amounts in the secondary market.

In the absence of anything mentioned for RBI regulated entities, it can be said that there is no change with respect to the ticket size for RBI regulated entities even in the case of publicly issued SDIs which should be seen only at the time of initial subscription.

It is worth mentioning that under the SSA Directions of RBI requires that in case of transactions carried out outside of the SSA Directions (the transactions undertaken by non-RBI regulated entities), the investors which are regulated by RBI have to maintain full capital charge. This therefore discourages Banks from investing in securitisation transactions which are carried out outside the ambit of the SSA Directions.  Therefore, both retail investors as well RBI regulated entities will not be the investors which will hinder liquidity and overall growth of the SDI market.

Minimum Risk Retention

Aligning with RBI’s SSA Direction, a Minimum Risk Retention (MRR) requirement for public issue of SDIs has been mandated requiring retention by the originator of a minimum of

  1. 5% in case the residual maturity of the underlying loans is upto 24 months and
  2. 10% in case residual maturity is more than 24 months

Further, in case of RMBS transactions, the MRR has been kept at 5% irrespective of the original tenure.

SEBI has aligned the entire MRR conditions with that of the RBI SSA Directions, including the quantum and form of maintenance of MRR. Accordingly, for financial sector entities, there is no change with respect to MRR.

By introducing MRR in the SDI Regulations, non-financial sector entities will be held to similar standards of accountability, skin-in-the-game, reducing the risks associated with the originate-to-sell model and aligning their practices with those of financial sector originators. This will strengthen investor confidence across the board and mitigate risks of moral hazard or lax underwriting standards.

It may however be noted here that in case of non financial originators, there could be situations where retention is being maintained in some form (for example in leasing transactions, the residual value of the leased assets continues to be held by the originator) and therefore such originators will be required to hold MRR in addition to the retention maintained.

Minimum Holding Period

SEBI has aligned the MHP conditions as prescribed under the SSA directions for all RBI regulated entities. Accordingly, there is no additional compliance requirement for RBI regulated entities. For receivables other than loans, the MHP condition will be specified by SEBI.

Exercise of Clean up Call option by the originator

The provisions for the exercise of the clean up call option has been aligned with those prescribed under the SSA Directions. These provisions have been introduced under the chapter applicable in case of public offer of SDIs. However, the SDI Regulations always provided for the exercise of clean up call option and what has been now introduced in simply the manner in which such an option has to be exercised.

In case of private placement of SDIs, can the clean up call option be exercised at a threshold exceeding 10% ?

Although the provisions for the exercise of clean up call options has been made a part of chapter applicable in case of public offers, it should however be noted that these provisions are also a part of the RBI SSA Directions. Accordingly, financial sector originators are bound by such conditions even if they go for private placement of SDIs. Further, even in the case of the non-financial sector originator, clean up call is simply the clean up of the leftovers when they serve no economic purpose. Therefore, in our view, exercising clean up calls at a higher threshold should not arise.

Periodic Disclosures to be made

On December 16, SEBI issued a circular (‘Periodic Disclosure Circular’) mandating periodic disclosures in respect of Securitised Debt Instruments (SDIs). 

The disclosure requirements are effective from March 31, 2026 and are required to be made on a periodic basis within 30 days from the end of March and September each year. 

The format for the disclosures has been aligned with the periodic disclosure requirements mandated by the RBI for securitisation transactions. Under the Periodic Disclosures Circular, formats have been prescribed for (i) securitisation of loans, listed SDIs, and credit facilities, and (ii) other types of exposures. 

Major disclosure requirements include Maturity characteristics of the underlying assets, MHP and MRR details, rating, recovery initiatives for default cases, industry-wise and geography-wise breakups, etc. 

Other Amendments

  1. Norms for liquidity facility aligned with that of RBI regulations
  2. All references to the Companies Act 1956 has been changed to Companies Act 2013
  3. Chapter on registration of trustees has been removed and reference has been made to SEBI (Debenture Trustees) Regulations, 1993
  4. Disclosure requirements for the originator and the SPDE have been prescribed; however the disclosure formats are yet to be issued by SEBI.
  5. Public offer of SDIs to remain open for a minimum period of 2 working days and upto a maximum of 10 working days.

Amendments proposed in the SEBI(LODR) Regulations

There are primarily two regulations which govern the listing of SDIs:

  1. SEBI SDI Regulations
  2. SEBI LODR Regulations

The following amendments have been proposed in the LODR regulations:

  1. SCORES registration to be taken at the trustee level
  2. Outstanding litigations, any material developments in relation to the originator or servicer or any other party to the transaction which could be prejudicial to the interests of the investors to be disclosed on an annual basis.
  3. Servicing related defaults to be disclosed on an annual basis.

[1] Read an article on the concept of sustainable SDIs at – https://vinodkothari.com/2024/09/sustainable-securitisation-the-next-in-filling-sustainable-finance-gap-in-india

Bond Credit Enhancement Framework: Competitive, rational, reasonable

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-Vinod Kothari (vinod@vinodkothari.com)

The RBI’s proposed framework for partial credit enhancement for bonds has significant improvements over the last 2015 version

The RBI released the draft of a new comprehensive framework for non-fund based support, including guarantees, co-acceptances, as well as partial credit enhancement (PCE) for bonds. The PCE framework is proposed to be significantly revamped, over its earlier 2015 version.

Note that PCE for corporate bonds was mentioned in the FM’s Budget 20251, specifically indicating the setting up of a PCE facility under the National Bank for Financing of Infrastructural Development (NaBFID).

A quick snapshot of how PCE works and who all can benefit is illustrated below:

The highlights of the changes under the new PCE framework are:

What is PCE?

Partial Credit Enhancement (PCE) is a risk-mitigating financial tool where a third party provides limited financial backing to improve the creditworthiness of a debt instrument. Provision of wrap or credit support for bonds is quite a common practice globally. 

PCE is a contingent liquidity facility – it allows the bond issuer to draw upon the PCE provider to service the bond. For example, if a coupon payment of a bond is due and the issuer has difficulty in servicing the same, the issuer may tap the PCE facility and do the servicing. The amount so tapped becomes the liability of the issuer to the PCE provider, of course, subordinated to the bondholders. In this sense, the PCE facility is a contingent line of credit. 

A situation of inability may arise at the time of eventual redemption of the bonds too – at that stage as well, the issuer may draw upon the PCE facility. 

Since the credit support is partial and not total, the maximum claim of the bond issuer against the PCE provider is limited to the extent of guarantee – if there is a 20% guarantee, only 20% of the bond size may be drawn by the issuer. If the facility is revolving in nature, this 20% may refer to the maximum amount tapped at any point of time.

Given that bond defaults are quite often triggered by timing and not the eventual failure of the bond issuer, a PCE facility provides a great avenue for avoiding default and consequential downgrade.  PCE provides a liquidity window, allowing the issuer to arrange liquidity in the meantime. 

Who can be the guarantee provider?

PCE under the earlier framework could have been given by banks. The ambit of guarantee providers has been expanded to include SCBs, AIFIs, NBFCs in Top, Upper and Middle Layers and HFCs. However, in case of NBFCs and HFCs, there are additional conditions as well as limit restrictions. 

As may be known, entities such as NABFID have been tasked with promoting bond markets by giving credit support. 

Who may be the bond issuers?

The PCE can be extended against bonds issued by corporates /special purpose vehicles (SPVs) for funding all types of projects and to bonds issued by Non-deposit taking NBFCs with asset size of ₹1,000 crore and above registered with RBI (including HFCs).

What are the key features of the bonds?

  1. REs may offer PCE only in respect of bonds whose pre-enhanced rating is “BBB minus” or better.
  2. REs shall not invest in corporate bonds which are credit enhanced by other REs. They may, however, provide other need based credit facilities (funded and/ or non-funded) to the corporate/ SPV. 
  3. To be eligible for PCE, corporate bonds shall be rated by a minimum of two external credit rating agencies at all times.
  4. Further, additional conditions for providing PCE to bonds issued by NBFCs and HFCs:
    1. The tenor of the bond issued by NBFCs/ HFCs for which PCE is provided shall not be less than three years. 
    2. The proceeds from the bonds backed by PCE from REs shall only be utilized for refinancing the existing debt of the NBFCs/ HFCs. Further, REs shall introduce appropriate mechanisms to monitor and ensure that the end-use condition is met. 

What will be the form of PCE? 

PCE shall be provided in the form of an irrevocable contingent line of credit (LOC) which will be drawn in case of shortfall in cash flows for servicing the bonds and thereby may improve the credit rating of the bond issue. The contingent facility may, at the discretion of the PCE providing RE, be made available as a revolving facility. Further, PCE cannot be provided by way of guarantee. 

What is the difference between a guarantee and an LOC? If a guarantor is called upon to make payments for a beneficiary, the guarantor steps into the shoes of the creditor, and has the same claim against the beneficiary as the original creditor. For example, if a guarantor makes a payment for a bond issuer’s obligations, the guarantor will have the same rights as the bondholders (security, priority, etc). On the contrary, the LOC is simply a line of liquidity, and explicitly, the claims of the LOC provider are subordinated to the claims of the bondholders.

If the bond partly amortises, is the amount of the PCE proportionately reduced? This should not be so. In fact, the PCE facility continues till the amortisation of the bonds in full. It is quite natural to expect that the defaults by a bond issuer may be back-heavy. For example, if there is a 20% PCE, it may have to be used for making the last tranche of redemption of the bonds. Therefore, the liability of the PCE provider will come down only when the outstanding obligation of the bond issuer comes to less than the size of the PCE.

Any limits or restrictions on the quantum of PCE by a single RE?

The existing PCE framework restricts a single entity to providing only 20% of the total 50% PCE limit for a bond issuance. It is now proposed that the sub-limit of 20% be removed, enabling single entity to provide upto 50% PCE support. 

Further, the exposure of an RE by way of PCEs to bonds issued by an NBFC/ HFC shall be restricted to one percent of capital funds of the RE, within the extant single/ group borrower exposure limits.

Who can invest in credit-enhanced bonds?

Under the existing framework, only the entities providing PCE were restricted from investing in the bonds they had credit-enhanced. However, the new Draft Directions expand this restriction by prohibiting all REs from investing in bonds that have been credit-enhanced through a PCE, regardless of whether they are the PCE provider. The draft regulations state that the same is with an intent to promote REs enabling wider investor participation.

This is, in fact, a major point that may need the attention of the regulator. A universal bar on all REs from investing in bonds which are wrapped by a PCE is neither desirable, nor optimal. Most bond placements are done by REs, and REs may have to warehouse the bonds. In addition, the treasuries of many REs make opportunistic investments in bonds.

Take, for instance, bonds credit enhanced by NABFID. The whole purpose of NABFID is to permit bonds to be issued by infrastructure sector entities, by which banks who may have extended funding will get an exit. But the treasuries of the very same banks may want to invest in the bonds, once the bonds have the backing of NABFID support. There is no reason why, for the sake of wider participation, investment by regulated entities should be barred. This is particularly at the present stage of India’s bond markets, where the markets are not liquid and mature enough to attract retail participation. 

What is the impact on capital computation?

Under the Draft Directions the capital is required to be maintained by the REs providing PCE based on the PCE amount based on applicable risk weight to the pre-enhanced rating of the bond. Under the earlier framework, the capital was computed so as to be equal to the difference between the capital required on bond before credit enhancement and the capital required on bond after credit enhancement. That is, the existing framework ensures that the PCE does not result into a capital release on a system-wide basis. This was not a logical provision, and we at VKC have made this point on various occasions2. 

Related Resources –

  1.  Union Budget 2025: Key Highlights and Reforms focusing on Financial Sector Entities ↩︎
  2. Partial Credit Enhancement: A Catalyst for Boosting Infrastructure Bond Issuances? ↩︎

Balancing between Bling & Business: RBI proposes new Gold Lending rules

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– Team Finserv | finserv@vinodkothari.com

Genesis of the change

The RBI on September 30, 2024, flagged several concerns in gold lending practices of financial entities. Further, there were separate guidelines for banks and NBFCs leading to regulatory arbitrage and operational ambiguity. On April 09, 2025, the RBI introduced the Reserve Bank of India (Lending Against Gold Collateral) Directions, 2025 (Draft Directions).

 The Draft Directions intend to:

  1. Harmonise guidelines w.r.t. gold lending across all REs.
  2. Address previous observations raised by RBI in lending practices and plug any loopholes.

In this write-up, we highlight the major changes for lenders, and particularly for NBFCs (The same are subsequently elaborated in the article).

Read more →

Banks drive Securitisation volumes to all-time high

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– Vinod Kothari, vinod@vinodkothari.com 

The release of securitisation data by the rating agencies shows that securitisation volumes in FY 25 saw a 30% increase, taking the volumes to a new watermark of volumes reaching ₹ 2,68,000 crores.

Inherent in this growth a completely new feature – banks entering as securitisation issuers. Our analysis shows that there are at least 4 banks which have originated volumes of nearly ₹26,800  crores, led by HDFC Bank with issuances adding up to almost ₹21,400 crores. Obviously, the above data of originations by banks were entirely securitisation notes or PTCs, as we would not expect banks (with the exception of small finance banks) to have done transfer of loan exposures (TLE) or so-called DA transactions.

The beginning of a new normal  

While banks are common issuers elsewhere in the world, banks have shunned securitisation issuance in the past and mostly remained limited to investing in securitisation notes and being on the buyside of loan transfer transactions. 

At the start of FY 2024, a notable development in the securitisation market was observed with the entry of banks. While this was mostly dominated by Small Finance Banks, there were certain private sector banks in the space as well. Bank-originated volumes grew to about ₹10,000 crore in FY 2024, up from ₹6,600 crore in FY 2023. In our publication last year, Vikas Path: The Securitised Path to Financial Inclusion, we commented that banks are likely to be motivated to enter securitisation markets in a big way in FY 2025. Relevant extract of the same is as follows:

“Going forward, will there be pressure on banks to use securitisation for refinancing themselves?

There are several factors that need to be evaluated in this context:

  • First, the capital adequacy ratios for most banks are comfortable – the RBI’s Financial Stability Report for December 2023 states that the CAR for all scheduled commercial banks was at 16.8% as of Sept., 2023, though lower than the number as on March 23. However, risk weights were recently increased on consumer lending and exposure to NBFCs. Further, there is a proposal to increase provisioning in case of project loans. The proposal to introduce expected credit losses has been pending for some time. Once implemented, it will cause significant increase in loan loss allowance, putting pressure on capital adequacy.
  • However, credit deposit ratio (CD ratio) has been increasing for most of the larger banks. This is due to sharp credit growth – there have already been several noises about the increasing levels of personal loans and consumer credit in the country
  • As credit continues to grow, and deposit growth may be sluggish due to increasing popularity of alternative retail investment products, banks will be left with very little options but to fund their asset buildup by opting for securitisation. Banks are also likely to look at the on-balance sheet advantage of securitisation – that while it offers capital relief, it does not force assets to be moved off the balance sheet. In fact, most Indian transactions stay on the balance sheet. Therefore, there is liquidity, and yet no contraction on the balance sheet size.

These factors may motivate banks to enter securitisation markets in FY 2025.”

Further, in Jan 2025, our write up Secure with Securitisation: Global Volumes Expected to Rise in 2025 discussed how the securitisation volumes surged about 27% on-year-on-year to ₹ 1.78 lakh crore in the first nine months of FY 24-25, supported by large issuances from private sector banks. In the third quarter alone, issuances touched ₹ 63,000 crore with private sector banks contributing to 28% of this (HDFC bank alone securitised new car loans by issuing PTCs valued at just over ₹12,700 crore). However, originations by NBFCs were only up by 5%. The market also saw 15 first time NBFC issuers, bringing the total number of originators to 152, compared with 136 in the last financial year. 

Our write up Indian securitisation enters a new phase: Banks originate with a bang also discussed how banks are now re-entering the market as originators. Earlier, after the GFC, banks shifted from being originators to becoming investors in securitised assets. This was however a stark contrast to the situation elsewhere in the world, where the issuances are primarily done by banks.

The issuance in FY 2025 is merely the start of a new normal: banks are expected to be dominant players in time to come. Capital relief as a motivation may have a strong appeal for banks, even though securitisation remains burdened with a lot of complicated rules.

Securitisation is complicated, burdened with rules

Fig 1: Securitisation- A Cart loaded with regulations

The data discussed above does not include co-lending, which seems to be quite popular, though the recent stress in microfinance and personal lending seems to have slowed the co-lending vehicle. Even though non-PSL co-lending currently seems to be going with “write your own rule book”, the RBI has taken note of the same, as the 9th April 2025 announcements of the RBI include a new proposed framework of rules for non-PSL co–lending. Hence, the cart is not going to be an empty one in time to come.

Fig 2: An empty cart waiting to get the load of new rules

Direct Assignments versus Securitisation

We have commented extensively earlier that transfer of loan exposures is not captured as a part of securitisation transactions internationally; however, in India, the so-called DA business has been an alternative to securitisation. Hence, Indian market data captures DA as a securitisation twin.

This year, like in the previous FY, securitisation notes or PTCs have taken nearly half of the last year’s volumes. Going forward, we expect more of securitisation notes, as bank issuances will naturally be focused on securitisation.

RMBS still remains a goal post. RMBS Development Company, formed with the agenda of promoting home loan securitisations, should soon be working to make an impact on the otherwise slow moving part of securitisation.

Structural Innovations

The otherwise dull and drab drawing board saw several structural innovations. There were time tranches, separation of liquidity and credit support, and even some interesting features such as two layers of cash collateral. Given the fact that the issuers of this year are strong and daring, their structures are obviously not dictated either by typecast investor templates, or by the placement agencies. Going forward, we see more structural innovations, in particular, IO strips being available for investors.

Headwinds in future?

Personal finance and microfinance are already seeing rising default rates. Lenders are reportedly moving towards the so-called “secured lending”, where security may be more of a sense of being secured, than the value or realisability of the collateral. As global trade turmoil makes its wide-spread impact, there may be challenging times for financial sector entities, which may show on the performance of loan pools too.

Another very significant risk on which long term loan portfolios may be sitting is climate risk. Several India states face significant risk of climate-induced dislocation of population. The risk of extreme weather changes is also quite evident. These changes may impact long-term loan portfolios, and the build up of the impact may be faster than anyone expects. 

In general, we all need to be prepared for major external correlation risks. These risks affect portfolios far more than loan level correlations do, and when they do, credit support levels quickly get eaten up.

Related resources –

Full Day Workshop on Securitisation,Transfer of Loans and Co-lending

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However, don’t worry we are announcing a repeat workshop on 21st May, 2025

Register here for the Repeat Workshop: https://forms.gle/TGQBkVXgzX8Ho5ts8

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