Securitisation of stressed assets: RBI floats paper on regulatory purview

Securitisation refers to a process that includes the pooling of loans and then selling them to a Special Purpose Entity which then issues securities backed by the loan pool

It is desirable that special purpose entities (SPEs) and resolution managers should be under the regulatory purview, the Reserve Bank of India (RBI) on Wednesday said in a discussion paper on framework for securitisation of stressed assets.

Securitisation refers to a process that includes the pooling of loans and selling them to an SPE, which then issues securities backed by the loan pool.

In the case of securitisation of stressed assets, the originator of non-performing assets (NPAs) sells them to an SPE, which in turn appoints an entity to manage the stressed assets. Investors who buy securitisation notes are paid based on recovery from the underlying assets.

The role played by resolution