In a move that is 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 make these instruments more transparent and attract more participants.
"With a view to enhance information available on the public domain on performance of asset pools on which securitised debt instruments are issued, it has been decided to put in place a Listing Agreement for securitised debt instruments," Sebi said in a circular.
It will help bring in transparency in listing of securitised debt instruments, as the issuers will now need to disclose information of three levels – the pool level, tranche level and select loan information.
According to industry experts, this will help increase the number of deals in the securitised debt market. "Today, deals happen on a one-to-one basis in the securitised debt market. This move will give fillip to this market," said Ashish Agarwal, director, A K Capital. At present, deals worth only Rs 4,000-5,000 crore are struck in the securitised debt market annually.
On February 25, the Economic Survey had stressed the need to deepen the corporate bond and debt markets. Pointing out that while the government securities market had evolved over the years and expanded due to the increasing borrowing requirements of the Centre, in contrast, the corporate bond market had languished, both in terms of market participation and structure.
Securitisation involves pooling of financial assets and the issuance of securities that are re-paid 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.
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The listing agreement for securitised debt instruments shall come into force with immediate effect, added Sebi circular. "Today's announcement will stimulate primary market and will gradually help in opening of secondary market for debt instruments," 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", on the lines of shelf prospectus.