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RBI constitutes committee on development of housing finance securitisation market

The mortgage securitisation market in India is primarily dominated by direct assignments among a limited set of market participants on account of various structural factors impacting both the demand and the supply side, as well as certain prudential, legal, tax and accounting issues.

RBI constitutes committee on development of housing finance securitisation market

Mumbai: The Reserve Bank of India (RBI) Wednesday constituted a six-member committee on Development of Housing Finance Securitisation Market to review the existing state of mortgage backed securitisation in India, including the regulations currently in place, and to make specific recommendations on suitably aligning the same with international norms

The mortgage securitisation market in India is primarily dominated by direct assignments among a limited set of market participants on account of various structural factors impacting both the demand and the supply side, as well as certain prudential, legal, tax and accounting issues, RBI said.

The committee will be headed by Bain & Co Senior Advisor Harsh Vardhan. Other members include CAFRAL Addl. Director Chandan Sinha; PNB Housing Finance MD Sanjaya Gupta; ICRA MD Naresh Thakkar; HSBC Chief Economist Pranjul Bhandari and Dvara Trust Chairman Bindu Ananth.        

The committee will analyse the prevalent structures for mortgage backed securitisation transactions in India, including legal, tax, valuation and accounting related issues, and suggest necessary modifications to address the requirements of both originators as well as investors.

It will identify the critical steps required for standardisation of mortgage backed securitisation practices such as, conforming mortgages, mortgage documentation standards, digital registry for ease of due diligence and verification by investors.

The panel will assess the role of various counterparties, including the servicers, trustees, rating agencies, etc. in the securitisation process and suggest measures required, if any to address the key risks, viz., structural, fiduciary and servicer risks;

It will also recommend specific measures for facilitating secondary market trading in mortgage securitisation instruments, such as broadening investor base, and strengthening market infrastructure.

The panel will analyse the inter-linkages between securitisation and other related financial market segments/instruments and recommend necessary policy interventions to leverage these inter-linkages and identify any other issue germane to the subject matter and make recommendations thereon.