Residential Mortgage Securities Listing by RBI

The Reserve Bank of India is proposing to carve out differential guidelines for residential mortgage-backed securities and set the stage for their listing. That’s according to a new draft framework for ‘Securitisation of Standard Assets. The key changes in the draft include a revised definition of securitisation, which excluded ‘direct assignment’ loan sales. Only transactions that result in multiple tranches of securities being issued reflecting different credit risks will be treated as securitisation transactions. Definition of securitisation has been modified to allow single-asset securitisations. Securitisation of exposures purchased from other lenders has been allowed. Residential Mortgage-Backed Securities

1. The RBI has proposed a minimum holding period for RMBS transactions at six months or six installments.
2. For such securities, a minimum retention rate of 5% of the book value of the loans being securitised has been proposed.
3. The RBI has proposed mandatory listing for home-loan backed assets if the loan-pool value is equivalent to Rs 500 crore or above. For RMBS worth less than Rs 500 crore, listing may be optional. The RBI has sought views on this.