What changed
RBI replaced existing securitisation instructions with a single Master Direction covering standard assets. The new framework applies to all new securitisation transactions from the effective date and includes updated definitions like 'bankruptcy remote' and 'clean-up call'.
What it means for you
Lenders must align their securitisation practices with the consolidated direction, ensuring compliance with the new definitions and operational requirements. This move enhances transparency and financial stability by standardising securitisation structures across banks, NBFCs, and HFCs.
What you must do
- Review and update internal securitisation policies to comply with the 2021 Master Direction.
- Ensure all new securitisation transactions from September 24, 2021 adhere to the new framework.
- Train relevant teams on updated definitions like 'bankruptcy remote' and 'clean-up call'.
- Coordinate with legal and compliance to align documentation with the direction's requirements.
Who it affects
Scheduled Commercial Banks (excluding RRBs), Small Finance Banks, All-India Term Financial Institutions (NABARD, NHB, EXIM Bank, SIDBI), NBFCs including HFCs
Does this direction apply to existing securitisation transactions?
No, it applies only to securitisation transactions undertaken after the effective date of September 24, 2021.
What is the legal basis for this Master Direction?
It is issued under Sections 21 and 35A of the Banking Regulation Act, 1949; Chapter IIIB of the RBI Act, 1934; and Sections 30A, 32, and 33 of the National Housing Bank Act, 1987.
Are Regional Rural Banks covered under this direction?
No, RRBs are explicitly excluded from the applicability of this Master Direction.