RBI Mulls Securitiation of Stressed Assets -

Reserve Bank of India (RBI) Has Proposed Introducing Securization of Stressed Assets via Market Mechanism to Ease the Burden of Stressed Assets on Banks.

The policy will enable lenders with stressed assets to bundle them together into tradeable secondies to share the risk of non-pharyming assets (npas). “It is proposed to enable security of stressed assets through market-based mechanism. Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002, ”RBI Governor Sanjay Malhotra Announced as Part of Additional regulatory measures on April 9.

The Securization Process will be performed by a resolution manager (rm) who will be appointed by a special purpose entity (SPE), RBI proposed in its draft. The Central Bank also proposed Valuation Methods, Capital Requirements for Investors, Disclosures to Be Made, Among others, in the Draft Document. The second asset can be sold to an spend only for cash.

The RBI also proposed that research, synthetic security, Farm Credit, Education Loan, Fraudulent Account, Wilful Default, Among others, will not be eligible for securitization.