RBI constitutes task force on development of secondary market for corporate loans

New Delhi:  The Reserve Bank of India (RBI) has constituted a six-member task force on development of secondary market for corporate loans to review the existing state of the market for loan sale/transfer in India as well as the international experience in loan trading.

The task force will make recommendations on creation of a loan contract registry to remove information asymmetries between buyers and sellers, its ownership structure and related protocols such as standardization of loan information, independent validation and data access.

It will also make recommendations on design of the market structure for loan sales/auctions, including online platforms and the related trading and transaction reporting infrastructure and appropriate measures for enhanced participation of buyers and sellers in loan sale/transfer.

make recommendations on creation of a loan contract registry to remove information asymmetries between buyers and sellers, its ownership structure and related protocols such as standardization of loan information, independent validation and data access.

It will also make recommendations on design of the market structure for loan sales/auctions, including online platforms and the related trading and transaction reporting infrastructure and appropriate measures for enhanced participation of buyers and sellers in loan sale/transfer.

The committee will be headed by Canara Bank Chairman T. N. Manoharan. Other members include Indian Banks’ Association Chief Executive V. G. Kannan, AZB and Partners Founding Partner Bahram Vakil, CAFRAL Additional Director Anand Srinivasan, J P Morgan Chief India Economist Sajjid Z. Chinoy and EY India Head – Restructuring & Turnaround Services Abizer Diwanji.

Secondary loan market in India is largely restricted to sale to Asset Reconstruction Companies and ad hoc sale to other lenders including banks, and no formalised mechanism has been developed to deepen the market. A vibrant, deep and liquid secondary market for debt would go a long way in increasing the efficiencies of the debt market in general and would aid in resolution of stressed assets in particular, RBI has said.