New Norms for Loan Sales and Securitisations—By RBI

Published on June 10, 2020
Current Context: The Reserve Bank of India has released two draft documents titled as ‘Draft Comprehensive Framework for Sale of Loan Exposures’ and ‘Draft Framework for Securitisation of Standard Assets’.
New Norms for Loan Sales and Securitisations—By RBI
  • Draft Comprehensive Framework for Sale of Loan Exposures: This draft deals with various issues like asset classification of the loans to be transferred, nature of entity purchasing loan and mode of transfer of loans. In this draft, existing conditions for the sale of NPAs are also rationalized. This drafted framework will build a robust secondary market for bank loans that will ensure proper price discovery.
  • Draft Framework for Securitisation of Standard Assets: This drafted framework will help to align the regulatory framework with the Basel guidelines on securitisation that have come into force from 1st January 2018. The framework describes that only transactions that result in multiple tranches of securities being issued reflecting different credit risks will be treated as securitisation transactions.
  • Static Part: 
    • HQ of RBI: Mumbai
    • Governor of RBI: Shaktikanta Das

Question: 

Q.1 Recently RBI has released a new set of norms for which of the following?
a. Loan Sales
b. Securitisation of Standard Assets
c. Prudential norms on income recognition
d. Both (a) and (b)

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