RBI seeks comments on recommendation

The Development of Housing Finance Securitisation Market Committee, constituted on 29 May 2019, has recommended to the RBI Governor broad perspective of enhancing efficiency and transparency of securitisation transactions.

The recommendations are:

setting up of a government sponsored intermediary, through the National Housing Bank, to enable market making and standard setting;

developing standards for loan origination, loan servicing, loan documentation, and loans to be eligible for securitisation, including standardised formats for data collection and aggregation;

separation of regulatory guidelines for direct assignment transactions and transactions involving pass through certificates as well as for mortgage backed securities (MBS) and asset backed securities (ABS);

relaxation of regulatory norms for minimum holding period (MHP) and minimum retention requirement (MRR) for MBS;

amendments and/or clarifications for registration and stamp duty requirements and tax guidelines to reduce the transaction costs for securitisation as also to encourage investments in pass-through-securities;

treating the assets underlying a securitisation transaction as well as any exposures in the form of credit enhancement as bankruptcy remote under the insolvency laws for financial firms; and,

changes to regulations issued by financial sector regulators to incentivise participation of their respective regulated entities as investors.

The report is on the RBI website since 9 Sept 2019 for comments of stakeholders and members of the public. Comments on the report may be sent by 30 September 2019 through email, said RBI. fiinews.com