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Securities and Exchange Board of India has proposed aligning securitisation norms for listed debt instruments with the regulatory framework of the Reserve Bank of India, as part of efforts to standardise market practices. The proposal, outlined in the past week, also includes relaxation provisions for certain transactions involving RBI-regulated entities. The move is aimed at improving consistency between capital markets and banking regulations while addressing structural gaps in securitisation transactions. The proposal is expected to impact originators, investors, and intermediaries involved in structured finance and debt market instruments.
The Securities and Exchange Board of India has proposed a framework to align securitisation structures in the capital markets with the regulatory norms prescribed by the Reserve Bank of India, in a move aimed at improving regulatory consistency and market efficiency. Advertisement
The proposal, outlined in a consultation issued in the past week, focuses on harmonising rules governing securitised debt instruments, particularly those issued through listed structures. It seeks to address differences between SEBI’s existing framework and RBI guidelines applicable to banks and non-banking financial companies engaged in securitisation activities.
Under the proposed changes, SEBI has indicated that securitisation transactions involving RBI-regulated entities could be allowed certain relaxations, subject to specific conditions. This includes waivers on select requirements to facilitate smoother execution of transactions that already comply with RBI norms.
Officials indicated that the alignment is intended to reduce duplication in compliance requirements and ensure that participants operating across both regulatory frameworks are not subject to conflicting rules. The proposal also aims to enhance transparency and investor protection by standardising disclosure norms and transaction structures.
Securitisation involves pooling financial assets such as loans and issuing securities backed by these assets to investors. The segment plays a key role in providing liquidity to lenders and enabling risk transfer within the financial system. However, differences in regulatory approaches between SEBI and RBI have led to complexities in structuring such transactions.
The proposed framework seeks to streamline these processes by bringing greater clarity to definitions, eligibility criteria, and operational requirements. It also considers feedback from market participants regarding practical challenges in executing securitisation deals under the current regulatory regime.
Market participants, including financial institutions, asset originators, and investors, are expected to be directly impacted by the proposed changes. Aligning regulatory frameworks is likely to facilitate participation by a wider set of investors and improve market depth.
The proposal also addresses concerns related to risk concentration and investor exposure, particularly in transactions involving single or limited borrowers. By introducing standardised norms, regulators aim to strengthen oversight while maintaining flexibility for legitimate market activity.
SEBI has invited public comments on the proposal, following which the final framework is expected to be notified. The move reflects ongoing regulatory efforts to develop India’s debt markets and improve integration between banking and capital market regulations.
The alignment of securitisation frameworks is expected to support the growth of structured finance in India, while ensuring that regulatory safeguards remain in place for market stability and investor protection.
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