The RBI has published a Discussion Paper on Securitisation of Stressed Assets Framework (SSAF). This paper was published on 25th January, 2023.
The paper explains that securitisation involves pooling of loans and selling them to a special purpose entity (SPE), which then issues securities backed by the loan pool. Securitisation of Stressed Assets (SSAs) is a financial structure whereby an originator of Non-Performing Assets (NPAs) sells these to a Special Purpose Entity (SPE) that funds such an acquisition by issuing securitisation notes. The SPE, in turn, appoints a servicing entity to manage the stressed assets, typically with a fee structure that incentivises them to maximise recoveries on the underlying loans. Investors are paid based on the recovery from underlying assets, as per the waterfall mechanism depending upon the seniority of the tranches.
The discussion paper delineates the broad features of the proposed framework on securitisation of stressed assets (SSAF). Additionally, it solicits views/comments on critical issues of SSAF since securitisation of non-performing assets (NPAs) has features that distinguish it from the securitisation of standard assets.
Furthermore, the paper details 13 specific questions on which comments are solicited from the public. The last date to furnish these 28th February, 2023.
These comments may be submitted to the Chief General Manager, Credit Risk Group, Department of Regulation, Central Office, Reserve Bank of India, 12th Floor, Central Office Building, Shahid Bhagat Singh Marg, Fort, Mumbai – 400001. They may also be submitted by e-mail with the subject line “Discussion Paper on Securitisation of Stressed Assets Framework (SSAF)”.