The Reserve Bank of India recently released the Discussion Paper on SSAF inviting comments from stakeholders. As part of the Statement on Developmental and Regulatory Policies released on September 30, 2022, RBI had proposed to introduce a framework for securitisation of stressed assets, in addition to the ARC route. It was announced that a discussion paper detailing relevant contours of the proposed framework would be issued shortly.
The Discussion paper broadly covers nine relevant areas of the framework including asset universe, asset eligibility, minimum risk retention, regulatory framework for special purpose entity and resolution manager, access to finance for resolution manager, capital treatment, due diligence, credit enhancement, and valuation. It draws upon similar frameworks introduced in other jurisdictions, while trying to keep it structurally aligned with the framework for securitisation of standard assets.
Securitisation involves pooling of loans and selling them to a special purpose entity (SPE), which then issues securities backed by the loan pool. RBI has invited comments which can be submitted by February 28, 2023.
Read Discussion Paper