SEBI to introduce new securitisation platform; MFIs to gain

Expressing confidence that India's securitisation market is revving up for a "take-off", RBI's Deputy Governor R Gandhi today said capital markets regulator Sebi is working on a new platform for such transactions.

Besides, insurance and pension regulators IRDAI and PFRDA have also been asked to facilitate long-term investments by insurance and pension funds in securitisation products, he said.

Under securitisation, lenders pool in loans and turn them into marketable securities to be sold to investors. In the domestic market, the bulk of the securitised loans are those originated by MFIs and the commercial vehicles and construction equipment finance loans sold by NBFCs.

Gandhi said the trading volumes have been falling in the securitisation market, but it's now on the cusp of a high growth trajectory and promised all help from the regulators to facilitate such an expansion.

"In my opinion, our securitisation market is revving up for a take-off," he said at an event organised by the National Institute for Securities Market (NISM).

Acknowledging that industry views the norms as "conservative", Gandhi promised that RBI will do everything for development of the market and listed out a host of factors which will drive it.

From a high of Rs 63,733 crore in FY08, securitisation volumes have dropped to a third at Rs 28,800 crore in FY14, Gandhi said.

There has been a dip in securitisation of the better rated assets as well, he said, adding that the share of AAA-rated assets has dipped to 26 per cent in FY14 from 45 per cent in FY12.

The priority sector lending (PSL) obligations for banks will continue to help drive securitisation as a bank can meet shortfall by picking up pools in securitisation transactions, he said while conceding that the move to PSL certificates under new norms may dent growth.

Non-banking lenders and MFIs, whose strength lies in origination of loans through wider networks, will also continue to pool in their folios to raise resources from securitisation, he said.

Gandhi added that Sebi is examining the prospects of setting up trading and reporting platforms where securitisation transactions will be reported and a central data repository will be available to the securitisation market participants.

The pensions funds are not allowed to invest in such pools and insurance companies are restricted to invest only in high-rated papers, Gandhi said, while adding that their respective regulators -- IRDAI and PFRDA -- have been requested to look into their roles and regulations to facilitate long-term investment by insurance and pension funds in securitisation products.

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