The Reserve Bank of India (RBI) on Wednesday said the framework on securitisation of stressed assets (SSA) can be extended to standard assets with a certain ceiling. The current guidelines on SSA, standard assets eligible to be included, are in the special mention account (SMA) category.
“The question that needs to be addressed in respect of the SSA framework is whether the framework should be restricted only to NPAs, or expanded to include standard assets too, up to a ceiling,” the RBI said in a discussion paper.
The paper also discussed inclusion of retail and large corporate loans under the SSA framework. In discussions held by the RBI, some participants were in favour of including retail assets as they have predictable cash flows, reducing the complexities involved in structuring such transactions.
In case of large corporate loans, which have highly uncertain cash flows, delays in decision making by the committee of creditors lead to deterioration in value of underlying, and representation by the resolution manager is only limited to a part of the entire set of creditors.
The RBI has suggested a floor on the value of underlying loans or a limit on the number of loans that can be included as underlying assets.
The RBI has also discussed the need for bringing the special purpose entity and resolution manager in the regulatory ambit of the central bank rules. The RBI is considering to develop a mechanism to regulate these entities.