SEBI norms for listing security receipts of ARCs likely by Nov

Tarun SharmaMoneycontrolThe Securities and Exchange Board of India has begun drawing up a roadmap for listing and trading of security receipts issued by a securitization company or asset reconstruction company, on stock exchanges. The regulator is seeking the inputs of the Reserve Bank of India in framing the regulations. Asset reconstruction companies buy distressed assets—bad loans—of banks/financial institutions at a discount. They have an important role to play in an environment where public sector banks are reeling under the burden of bad loans, and the government does not have the money to recapitalise the banks. SARFAESI Act provides for issue of security receipts (SRs) by asset reconstruction companies to qualified institutional buyers for raising funds to acquire financial assets. These instruments are generally privately placed and can be listed. SRs are freely transferable to any qualified institutional buyers.SEBI has set itself six to nine months time to form guidelines for listing and trading of security receipts on stock exchanges.At the upcoming board meeting in April, SEBI will propose amendment in Issue of Capital and Disclosure Requirements (ICDR). SEBI will include security receipts issued by a securitization company or a reconstruction company under the SARFAESI Act in ICDR infrastructure section with this amendment. After that the regulator will put out a consultation paper. “We will propose that ARCs be treated on par with infrastructure companies; they (ARCs) have huge potential,” a source familiar with the development told Moneycontrol.The regulator plans to allow foreign portfolio investors to invest in SRs. It also plans to offer easier rules for the listing of SRs.In its 2017 Budget, the government allowed listing of SRs on stock exchanges for improving capital flow into the securitization industry, which in turn will help the banking system in dealing with the bad loan problem.