Securities and Exchange Board of India (SEBI) has introduced comprehensive regulatory guidelines for Securitised Debt Instruments (SDIs) to enhance transparency, investor protection, and market integrity. These include a minimum investment threshold of ₹1 crore and mandatory demat format for issuance and transfer of all SDIs.
These changes aim to streamline securitisation practices in India, aligning them with international standards and addressing associated risks.
Key Highlights of SEBI’s New Guidelines on SDIs
₹1 Crore Minimum Investment Threshold
- Applies to RBI-regulated and unregulated originators engaging in securitisation.
- Also applicable to subsequent transfers of SDIs by originators not regulated by RBI.
- For SDIs with listed securities as underlying, the ticket size will be equal to the highest face value among such securities.
Mandatory Dematerialised (Demat) Format
- All SDIs must be issued and transferred exclusively in demat form, regardless of the originator’s regulatory status.
Public Offer Regulations
- Public offer window must remain open for at least 3 days and up to 10 days.
- Advertisement norms aligned with SEBI’s rules for non-convertible securities.
Minimum Track Record for Originators
- A minimum operating track record of 3 years is required for originators participating in securitisation.
Risk Retention and Holding Period Norms
- Minimum Risk Retention (MRR):
- 10% of the securitised pool.
- 5% if the receivables have maturity of up to 24 months.
- Minimum Holding Period (MHP):
- 3 months for loans with tenor up to 2 years.
- 6 months for loans with tenor more than 2 years.
Clean-Up Call Provision
- An optional clean-up call allows originators to repurchase up to 10% of the original value of assets.
- Designed to manage the longevity of asset pools.
Permissible Asset Classes and Restrictions
- Updated definition of “debt/receivables” now allows:
- Listed debt securities
- Accepted trade receivables
- Rental income
- Equipment leases
- Disallows:
- Re-securitisation
- Synthetic securitisation
Legal Framework Update
- SEBI has amended its regulations on “Issue and Listing of Securitised Debt Instruments and Security Receipts” to reflect these new changes.
About Securitised Debt Instruments (SDIs)
- SDIs are financial instruments created by pooling various types of debt assets (e.g., loans, mortgages, receivables).
- These pooled assets are then securitised and sold as securities to investors.
- This process helps originators (like banks) convert illiquid assets into liquid instruments.
- Investors receive returns based on the performance of the underlying asset pool, while the risk is diversified across assets.
Significance of SEBI’s New Framework
- Enhances investor protection, transparency, and market discipline.
- Strengthens the regulatory ecosystem for debt securitisation.
- Aims to promote responsible lending, originator accountability, and risk containment in structured finance products.