In a move expected to improve liquidity and deepen the securitised debt market, the Securities and Exchange Board of India (Sebi) introduced a 'Listing Agreement for Securitised Debt Instruments'. This is expected to make these instruments more transparent and improve their secondary market liquidity.
It will help bring transparency in listing of securitised debt instruments, as issuers would now need to disclose information of three levels – the pool level, tranche level and select loan information.
“Today, deals happen on a one-to-one basis in the securitised debt market. This move will give a fillip to this market,” said Ashish Agarwal, director, A K Capital. At present, deals worth only Rs 4,000-5,000 crore are struck annually in this market.
On February 25, the Economic Survey had stressed the need to deepen the corporate bond and debt markets. It noted the government securities market had evolved over the years and expanded due to the increasing borrowing requirements of the Centre, but in contrast, the corporate bond market had languished, both in participation and structure.
Securitisation involves pooling of financial assets and the issuance of securities repaid from the cash flows generated by these assets. Common assets for securitisation include credit cards, mortgages, auto and consumer loans, student loans, corporate debt, export receivable and offshore remittances.
The listing agreement for securitised debt instruments shall come into force with immediate effect, added the Sebi circular. “Today's announcement will stimulate the primary market and gradually help in opening of the secondary market for debt instruments,” said Jagannadham Thunuguntla, head (research), SMC Global.
The Sebi regulations issued in 2008 provided for issuance and listing of securitised debt instruments by a special purpose distinct entity (SPDE). These SPDEs, which are already listed and come out with frequent issues of securitised debt instruments, will now file ‘umbrella offer documents’.