RBI releases draft paper on market-based mechanism for securitisation of stressed assets

Reserve Bank of India (RBI) Governor Sanjay Malhotra released the draft framework on securitisation of stressed assets to enable a market-based mechanism while announcing the monetary policy on April 9.

This will be in addition to the existing asset reconstruction companies (ARCs) route under SARFAESI (Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002), Malhotra added.

The governor added that the draft framework was prepared after receiving suggestions from stakeholders on the discussion paper.

Prudentially structured securitisation transaction can be an enabler for resolution of stressed assets as it is expected to improve risk distribution and provide an exit route
from such exposures for lenders, the governor said.