RBI releases discussion paper on securitisation of stressed assets framework

Updated: Jan 25 2023 9:05PM

RBI releases discussion paper on securitisation of stressed assets framework

Mumbai, Jan 25 (PTI) The Reserve Bank of India on Wednesday released a discussion paper on securitisation of stressed assets framework, which will ultimately lead to the creation of one more alternative for lenders for resolving sour loans.

Securitisation involves pooling of loans and selling them to a special purpose entity, so that a lender gets liquidity upfront on the assets it has originated. Till now, securitisation is allowed only in the case of standard assets while lenders have to largely rely on Asset Reconstruction Companies (ARCs) for bad assets.

In September 2022, RBI announced its intent to introduce a new framework in addition to the ARC route, following deliberations which had started way back in 2019 as per recommendations made by the Task Force on the Development of Secondary Market for Corporate Loans. The task force was constituted by the central bank.