Sebi proposes changes to SDI regulations to align with RBI directions

The Securities and Exchange Board of India (Sebi) on Monday proposed amendments to norms governing securitised debt instruments (SDI Regulations) to align its framework with the Reserve Bank of India’s (RBI’s) 2021 directions on securitisation of standard assets (SSA Directions).

 

The proposals follow feedback highlighting differences between Sebi’s regulations and RBI guidelines, particularly for securitisation transactions originated by RBI-regulated entities.

 

Sebi has proposed to permit single-asset securitisation for RBI-regulated entities by exempting them from the requirement that no obligor should account for more than 25 per cent of the asset pool.

 

The existing conditions restrict the listing of such instruments though they are permitted under the RBI framework.

 

 

“This impacts the development of the listed securitisation market, particularly for RBI-regulated entities that are already subject to prudential supervision by RBI,” said Sebi in the consultation paper.

 

Sebi has also proposed exempting RBI-regulated entities from restrictions that prevent securitisation transactions between an originator and a special purpose distinct entity (SPDE) belonging to the same group.

 

The exemption is proposed as the RBI framework does not contain any such prohibition though it requires that the originator should not exercise control over the SPDE or trustee.

 

Originator refers to the original lender or seller of the assets—typically banks, financial institutions or corporates that creates the underlying receivables and assigns them to an SPDE.

 

On governance, Sebi has proposed that where the originator is an RBI-regulated entity, it should not have more than one representative on the board of the SPDE. And, such a representative should not have veto powers.

 

Further, the regulator has proposed modifying provisions related to winding up of securitisation schemes.

 

Instead of directing liquidation of the asset pool upon suspension or cancellation of a trustee’s registration, Sebi has proposed allowing the appointment of a new trustee.