The Securities and Exchange Board of India (SEBI) has proposed a series of amendments to its securitised debt regulations to align them with the Reserve Bank of India’s 2021 framework for securitisation of standard assets, particularly for transactions by RBI-regulated entities.
The regulator has proposed allowing single-asset securitisation for RBI-regulated entities by exempting them from the cap of 25 per cent of the asset pool for a single obligor as it “restricts listing of SDIs where the underlying comprises a single asset.” The existing rules restrict listing of such instruments, even though they are permitted under the latest RBI framework.
SEBI has also proposed removing restrictions that currently prevent securitisation transactions between entities within the same group, provided the originator is RBI-regulated. The RBI framework does not contain any such prohibition but it requires that the originator should not exercise control over the SPDE or trustee.
Governance norms
In the governance norms for special purpose distinct entities (SPDEs) where the originator is RBI-regulated, SEBI has suggested limiting representation on the SPDE board to one member without veto power, in line with RBI guidelines.
“SEBI has received feedback that the aforesaid regulation varies from the RBI’s extant regulatory framework, which stipulates inter alia that the originator should not have more than one representative on the Board of the SPDE who should be without veto power, since this may possibly dilute the principle of having arms’ length basis for transactions between the originator and the SPDE,” it said in draft paper, inviting public comments by May 25.
On winding up of securitisation transactions, SEBI has suggested replacing the requirement of liquidating schemes with appointing a new trustee in case of suspension or cancellation, due to inconsistencies with RBI norms.