Sebi seeks to align securitisation framework with RBI regulations

Synopsis

Sebi has proposed easing securitisation norms, including relaxing the 25% single borrower exposure cap, to align with RBI regulations for entities governed by central bank rules. The regulator also suggested shifting disclosure responsibilities to the servicer and modifying governance for SPDEs, aiming to facilitate single-asset deals and enhance transparency.

Mumbai: The Securities and Exchange Board of India (Sebi) on Monday proposed easing securitisation norms, including relaxing the 25% cap on single borrower exposure in the asset pool, to align its framework with the rules of the banking regulator. These exemptions would apply only to entities governed by central bank norms.

Sebi has invited public comments on its latest securitisation proposals until May 25.

Under the existing framework aimed at risk mitigation, securitised debt instruments should adhere to strict diversification norms, including a cap that limits any single borrower's share to 25% of the asset pool at issuance.

The current Sebi securitisation caps are meant to reduce risk by ensuring the pool is not overly dependent on one borrower.

However, the regulator said this rule has effectively blocked listing of securitisation deals backed by a single asset, even though such structures are allowed under Reserve Bank of India (RBI) norms. To address this, Sebi has proposed waiving the 25% cap for RBI-regulated entities, thus enabling single-asset deals to be listed.

In a parallel move to strengthen transparency, Sebi has suggested shifting the responsibility for periodic disclosures on the performance of the underlying asset pool from the originator to the servicer.

The servicer, which may or may not be the originator, is responsible for collecting and monitoring receivables, making it better placed to provide timely and accurate information to investors.

The regulator has also proposed changes to governance norms for special purpose distinct entities (SPDEs). For RBI-regulated originators, representation on the SPDE board would be capped at one member without veto powers, in line with RBI guidelines.

Additionally, Sebi has proposed easing certain restrictions on securitisation structures and replacing mandatory winding-up of transactions in specific cases with the appointment of a new trustee.

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