RBI directs securitisation firms to disclose NAVs

Mumbai, May 28 | Updated: May 29 2007, 05:30am hrs
The Reserve Bank of India (RBI), through a notification on Monday, has asked securitization companies (SCs) or reconstruction companies (RCs) registered with it to declare the net asset values (NAV) of security receipts (SRs) issued by them.

This will help the Qualified Institutional Buyers (QIBs) to know the value of their investment in the SRs issued by the SC/RC registered with the RBI under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act).

For arriving at NAVs, the SRs should be rated, as rating is an important objective tool, the RBI said.

The rating should be obtained from rating agencies registered with Securities and Exchange Board of India (SEBI). Moreover, commonality and conflict of interest if any, between the SCs/RCs and rating agency should be disclosed too.

The ratings will be assigned on a new, specifically developed rating scale. Each rating category in the recovery scale will have an associate range of recovery, expressed in percentage terms, which can be used for arriving at NAV of SRs, the release said.

The initial rating or grading would be assigned within one year from acquisition of assets by SCs/RCs or finalisation of resolution strategy, whichever is earlier. Thereafter, rating or grading shall be reviewed at half-yearly intervals,that is, as on June 30 and December 31 every year.

The SCs/RCs should declare the NAVs within two months from the date of half-yearly review that is by August 31 and February 28 respectively.

For the purpose of valuation, each rating category in the RR scale will have an associate range of recovery, expressed in percentage terms, which can be used for computing NAV of SRs.