New rules for Assets Securitisation
The Reserve Bank of India (RBI) has proposed new rules for securitisation for assets which require lenders to hold on to loans for a minimum period and retain a portion of the loan till maturity.
Banks seek to benefit from their loans by pooling and selling them to investors, called securitisation, which passes on credit risk from the bank to the investors.
The Reserve Bank of India (RBI) said assets such as car and home loans with repayments due for up to 24 months should be held by the bank for at least nine months before selling them.
The loans, which allow for a one-time full repayment, will need to stay on the bank’s books for at least 12 months, it added.
Loans with a pending maturity of more than two years, which also carry a one-time repayment clause are not eligible for securitisation, the central bank said.
The RBI has sought feedback on the draft guidelines by May 10.
