India’s banking regulator introduced a framework for securitisation of stressed assets and has proposed changes to how banks calculate loan-loss provisions.
Securitisation Of Stressed Assets
The framework for the securitisation of stressed assets, the governor said, will exist in addition to the asset reconstruction company route and will be similar to that for securitisation of standard assets.
“This will provide an alternative mechanism for securitisation of [non-performing assets], in addition to the existing ARC route,” Das said.
This measure, when introduced, will likely allow investors other than ARCs to participate in securitisations of stressed assets and will result in deepening of the market for NPAs, said L Viswanathan, partner, Cyril Amarchand Mangaldas. “This will also allow participation by newer pools of capital and allow regulated entities to divest their assets to such players in order to manage their balance sheets.
While the central bank had issued guidelines to regulate payment aggregators in March 2020, the current rules only apply to online payment aggregators. The RBI has now proposed to extend these rules to offline payment aggregators as well and the move is “expected to bring in regulatory synergy and convergence on data standards”, Das said.
Regional Rural Banks
Das also said the RBI would issue a fresh set of criteria that qualify regional rural banks to offer internet banking to customers.
“Keeping in view the need to promote the spread of digital banking in rural areas, these criteria are being rationalised. The revised guidelines will be issued separately,” he said.
The announcements came after the Monetary Policy Committee’s meeting in which the panel decided to raise the repo rate by 50 basis points to quell inflation. “The MPC also decided by a majority of five out of six members to remain focused on withdrawal of accommodation to ensure that inflation remains within the target,” Das said in his address.
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