Context:
The Securities and Exchange Board of India (SEBI) has introduced a new set of regulations for securitised debt instruments (SDIs), focusing on enhancing transparency, risk management, and investor confidence. The regulations, announced through a gazette notification, mandate key changes in the issuance, transfer, and management of SDIs.
What are SDIs?
- Securitised Debt Instruments (SDIs) are created by pooling various debt assets (e.g., loans, mortgages, receivables).
- These pooled assets are sold as securities to investors, enabling originators (like banks) to convert illiquid assets into tradable instruments.
- Investors earn returns based on the performance of the underlying debt pool, with risk diversification across multiple assets.
Key Highlights of SEBI’s New Rules on Securitisation
Minimum Investment Threshold (Ticket Size)
- Primary Issuance:
- ₹1 crore minimum investment size for all investors in SDIs.
- Subsequent Transfers:
- ₹1 crore for originators not regulated by the RBI.
- For SDIs backed by listed securities: Minimum ticket size equals the highest face value among underlying securities.
Issue Process and Form
- Public Offer Duration:
- Minimum: 3 days
- Maximum: 10 days
- Dematerialised Form (Demat):
- All SDIs must be issued and transferred in demat form only.
Originator Eligibility & Track Record
- Operating History:
- Minimum of 3 years of operational track record required for originators.
Risk Retention and Holding Period
- Minimum Risk Retention:
- 10% of securitised pool
- 5% if underlying receivables mature within 24 months
- Minimum Holding Period (MHP):
- 3 months for loans with tenure ≤ 2 years
- 6 months for loans with tenure > 2 years
Asset Eligibility & Definitions
- Permissible Underlying Assets:
- Listed debt securities
- Accepted trade receivables
- Rental incomes
- Equipment leases
- Prohibited Assets:
- Re-securitisation (i.e., securitising existing securitised assets)
- Synthetic securitisation (derivative-based exposure)
