SEBI Expands Qualified Buyers List for Security Receipts to Include NBFCs, HFCs

Markets regulator Securities and Exchange Board of India has allowed all non-banking financial companies, including housing finance companies, to invest in security receipts issued by Asset Reconstruction Companies, according to a gazette notification dated Feb. 28.

“All NBFCs including HFCs regulated by the Reserve Bank of India are hereby specified as qualified buyers for the purposes of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (54 of 2002),” SEBI said.

The move expands the pool of entities eligible to acquire security receipts from ARCs, increasing liquidity in the distressed asset market. ARCs acquire bad loans from banks and financial institutions at a discount and issue security receipts against them.

SEBI stated that “NBFCs including HFCs will have to ensure that the defaulting promoters or their related parties do not directly or indirectly gain access to secured assets through security receipts; and such NBFCs including HFCs shall comply with such other conditions as the RBI may specify from time to time.”

Under the SARFAESI Act, only qualified buyers are permitted to invest in security receipts.

(With text inputs from PTI.)