New Delhi: The Reserve Bank of India (RBI) committee on the development of Housing Finance Securitisation Market has submitted its report to the central bank, suggesting setting up of a government sponsored intermediary, through the National Housing Bank, to enable market making and standard setting.


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The panel was constituted in May this year under the chairmanship Harsh Vardhan, Senior Advisor, Bain & Co. The Terms of Reference of the Committee were to review the existing state of mortgage securitisation market in India and make recommendations to address various issues relating to originators/investors as well as market microstructure.


It suggest that an intermediary to promote housing finance securitisation with the primary functions of standard-setting and market making should be established by NHB.


It is also proposed that this entity would have 51 percent ownership by the government through the NHB initially. The government ownership in the entity would then be gradually reduced to 26 percent over a period of 5 years. The remaining capital of 49 percent may be initially raised from multilateral agencies.


The entity, the panel suggested will start with Rs 500 crore of initial capital.


“In addition to the above-mentionedliability structure, the intermediary would be allowed to invest in each pool it securitisesto the extent of 5 percent of the pool or 5 percent  of its own capital base, whichever is lower. An overall aggregate limit of 50 percent  of capital of the intermediary can be set as the limit for market making activities,” the panel recommended.