India’s capital markets regulator Securities and Exchange Board of India (SEBI) has proposed a comprehensive set of reforms to strengthen the framework governing securitised debt instruments (SDIs). The proposed changes include permitting single-asset securitisation by entities regulated by the Reserve Bank of India, simplifying the winding-up process for securitisation transactions, and relaxing certain structural constraints to enhance market participation. SEBI has also recommended shifting periodic disclosure responsibilities from originators to servicers and revising the composition of trustees overseeing special-purpose entities. The reforms aim to improve transparency, efficiency, and depth in India’s evolving securitised debt market.
Regulatory Push to Strengthen Securitisation Market
Securities and Exchange Board of India has outlined a series of proposed regulatory amendments designed to modernise and expand India’s securitised debt ecosystem. The move reflects a broader policy push to deepen the bond market and improve credit intermediation efficiency.
Securitised debt instruments (SDIs), which pool financial assets and convert them into tradable securities, are increasingly viewed as a key tool for enhancing liquidity in the financial system.
Opening Door to Single-Asset Securitisation
One of the most significant proposals is the allowance of single-asset securitisation for entities regulated by the Reserve Bank of India. This marks a departure from the traditional requirement of pooling multiple assets.
The change is expected to provide greater flexibility to financial institutions, enabling them to structure transactions more efficiently while broadening investor participation in niche credit exposures.
Simplifying Transaction Wind-Up Framework
SEBI has also proposed easing the process for winding up securitisation transactions. The existing framework is often viewed as complex, particularly in cases where underlying assets are fully redeemed or performance cycles conclude.
By streamlining closure mechanisms, the regulator aims to reduce administrative friction and improve operational efficiency within structured finance markets.
Shift in Disclosure Responsibility
Another key reform involves transferring the responsibility for periodic performance disclosures of underlying asset pools from originators to servicers. This shift is intended to improve data consistency and accountability.
Servicers, who are more closely involved in the ongoing management of asset pools, are considered better positioned to provide accurate and timely updates on portfolio performance.
Governance Reforms for Special-Purpose Entities
The regulator has also proposed changes to the composition of boards overseeing trustees of special-purpose distinct entities. These entities play a central role in managing securitisation structures and safeguarding investor interests.
The proposed adjustments are aimed at strengthening governance standards and ensuring greater oversight in complex financial structures.
Broader Market Development Objectives
The proposed reforms are part of a broader strategy by Securities and Exchange Board of India to deepen India’s corporate debt market and improve access to structured credit products.
A more flexible securitisation framework is expected to attract wider participation from institutional investors, including mutual funds, insurance companies, and banks.
Conclusion: Toward a More Efficient Structured Finance Ecosystem
SEBI’s proposed changes represent a significant step toward modernising India’s securitised debt market. By introducing greater flexibility, improving disclosure norms, and strengthening governance frameworks, the regulator aims to enhance transparency and investor confidence.
If implemented, these reforms could play a pivotal role in expanding the depth and sophistication of India’s structured finance ecosystem, aligning it more closely with global best practices.
Comments