**Summary:**
This circular, issued by the Reserve Bank of India (RBI) on November 29, 2018, announces a relaxation of securitization guidelines for Non-Banking Financial Companies (NBFCs). Specifically, it amends paragraph 102 of the Master Directions on Non-Banking Financial Company Systemically Important Non-Deposit taking Company and Deposit taking Company Reserve Bank Directions dated September 01, 2016, and paragraph 89 of Non-Banking Financial Company Non-Systemically Important Non-Deposit taking Company Reserve Bank Directions dated September 01, 2016.
The relaxation pertains to the Minimum Holding Period (MHP) requirement for originating NBFCs securitizing or assigning eligible assets. For loans with an original maturity above 5 years, the MHP is reduced to the receipt of six monthly installments or two quarterly installments, as applicable. This is subject to a prudential requirement of a Minimum Retention Requirement (MRR) of 20% of the book value of the loans being securitized or 20% of the cash flows from the assets assigned.
This dispensation is applicable for securitization/assignment transactions carried out within six months from the date of the circular's issuance. All other terms and conditions outlined in the original Directions remain unchanged.
The issuing department is the Department of Non-Banking Regulation, Central Office, located at 2nd Floor, Centre I, World Trade Centre, Cuffe Parade, Colaba, Mumbai – 400005, India. Contact information includes telephone: 91-22-22161940, fax: 91-22-22150540, and email: cgmdnbrcorbi.org.in. The circular was issued by Manoranjan Mishra, Chief General Manager. The reference number for the circular is RBI/2018-19/82 DNBR.PD.CC.No.95/03.10.001/2018-19.
Key Entities Referenced
Reserve Bank of India: The central bank of India, the primary regulator in this notification.
NBFCs: Non-Banking Financial Companies, the entities to which this notification is addressed.
Securitisation Transactions: The financial activity that is the subject of the relaxed guidelines.
Master Directions on Non-Banking Financial Company Systemically Important Non-Deposit taking Company and Deposit taking Company Reserve Bank Directions: The primary regulatory document being amended by this notification.
Non-Banking Financial Company Non-Systemically Important Non-Deposit taking Company Reserve Bank Directions: Another regulatory document being referenced in the notification.
Minimum Holding Period (MHP): A requirement for originating NBFCs, being relaxed for loans of original maturity above 5 years.
Minimum Retention Requirement (MRR): A prudential requirement for securitisation/assignment transactions.
Mumbai, Maharashtra: Location of the Central Office of the Department of Non-Banking Regulation.
भारतीय �रज़वर् ब�क
RESERVE BANK OF INDIA
www.rbi.org.in
RBI/2018-19/82
DNBR (PD) CC.No.95/03.10.001/2018-19 November 29, 2018
All NBFCs
Madam/Sir,
Relaxation on the guidelines to NBFCs on securitisation transactions
Please refer to the Guidelines on Securitisation Transactions vide paragraph 102 of
Master Directions on Non-Banking Financial Company - Systemically Important Non-
Deposit taking Company and Deposit taking Company (Reserve Bank) Directions
dated September 01, 2016 and paragraph 89 of Non-Banking Financial Company –
Non-Systemically Important Non-Deposit taking Company (Reserve Bank) Directions
dated September 01, 2016.
2. In order to encourage NBFCs to securitise/assign their eligible assets, it has been
decided to relax the Minimum Holding Period (MHP) requirement for originating
NBFCs, in respect of loans of original maturity above 5 years, to receipt of repayment
of six monthly instalments or two quarterly instalments (as applicable), subject to the
following prudential requirement:
Minimum Retention Requirement (MRR) for such securitisation/assignment
transactions shall be 20% of the book value of the loans being securitised/20% of
the cash flows from the assets assigned.
3. The above dispensation shall be applicable to securitisation/assignment
transactions carried out during a period of six months from the date of issuance of
this circular. Other terms and conditions of the above referred Directions remain the
same.
Yours faithfully
(Manoranjan Mishra)
Chief General Manager
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फोन: (+91-22) 22161940फैक्स:(91-22) 22150540, Email: cgmdnbrco@rbi.org.in
Department of Non-Banking Regulation, Central Office, 2nd Floor, Centre-I, World Trade Centre, Cuffe Parade, Colaba, Mumbai – 400005, India
Tel.: (+91-22) 22161940 Fax: (91-22) 22150540, Email: cgmdnbrco@rbi.org.in
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