India marked a significant milestone in its financial market with the listing of the country’s first Residential Mortgage-Backed Securities (RMBS) Pass Through Certificates (PTCs) on the National Stock Exchange (NSE). This move is expected to deepen the bond market and attract long-term investors.
Key Highlights
Issuer:
- The PTCs structured by RMBS Development Company Limited, a firm established to develop the RMBS market.
Originator of Loans:
- The underlying housing loans were originated by LIC Housing Finance Limited.
Total Issue Size: ₹1,000 crore (fully subscribed).
- No. of certificates: 1,00,000
- Face value per certificate: ₹1,00,000
Coupon Rate Discovery:
- Coupon discovered through the NSE’s Electronic Book Provider (EBP) platform – a first for Indian PTCs.
- Annual coupon rate: 7.26%
- Maturity: Approx. 20 years
Credit Rating:
- Rated AAA(SO) by CRISIL and CARE Ratings
Form of Issuance:
- Dematerialized (Demat) form- fully transferable and eligible for secondary market trading.
Background & Institutional Support
- In March 2025, the National Housing Bank (NHB) set up the RMBS Development Company Ltd. to:
- Facilitate the development of the RMBS market
- Attract long-term institutional investors like insurers, pension funds, and provident funds
- Special Purpose Vehicle (SPV):
For this issuance, India Residential Mortgage Trust 2025 01, an SPV, issued the PTCs.- Backed by a housing loan receivables pool worth ₹11.12 billion
Significance & Market Impact
- The housing finance regulator estimated ₹10,000 crore to ₹20,000 crore (USD $1.2–2.4 billion) will be raised through RMBS instruments in FY2025-26.
- Spread over 7 to 10 transactions during year.
- RMBS (Residential Mortgage-Backed Securities) commonly used globally to:
- Boost housing finance liquidity
- Offer stable long-term investment avenues
- Diversify credit exposure for institutional investors
What Are PTCs & RMBS?
- Pass Through Certificates (PTCs):
- Financial instruments that represent an investor’s share in a pool of loans or receivables.
- Investors receive repayments (EMIs) proportionally, including principal and interest.
- Residential Mortgage-Backed Securities (RMBS):
- A subset of asset-backed securities where the underlying assets are home loans.
- Cash flows from these mortgages are passed through to investors via PTCs
Why It Matters?
- First-of-its-kind development in India’s bond market.
- Expected to catalyze growth in housing finance, especially by enabling refinancing.
- Enhances transparency and investor confidence through:
- AAA ratings
- NSE’s EBP platform
- Demat issuance
- Encourages participation from long-term institutional investors in housing finance, strengthening India’s mortgage ecosystem.