Disclosure norms on securitisation need to be refined: Sebi

Market regulator, Securities and Exchange Board of India (Sebi) is of the view that disclosure requirements for securitisation transactions should be refined to enhance transparency and confidence in the market.

"I feel that the disclosure requirements (in securitised transactions) should be done in a manner that there is a balance between the quality and quantity of disclosure. Many a time, an increase in the quantity has eroded the quality of disclosure," Sebis Whole Time Member, Prashant Saran told a seminar here.

Securitisation market in India is still at a nascent stage and comprises mainly deals in asset backed securities (ABS) and Credit Derivative Swaps (CDS) products.

They (disclosures) should be made in such a manner that the real issues will be communicated. Regulators should pay attention to this aspect, Saran said.

International Organization of Securities Commissions (IOSCO), the international body of capital market regulators, had put out a draft paper in May to bring more transparency to securitization and the recommendations are expected to be implemented by all member nations including India, Saran said.

Noting that certain banks have been misusing securitization transactions to show a healthy balance sheet, by not accounting the sale of bad debts as NPAs but showing them as profit on sales, Saran said there should be steps from the regulators to prevent such actions.

There is an issue of possibility of balance sheet manipulation I do feel that as far as the regulatory structure is concerned, we are ahead of the curve, Saran said.