SEBI Proposes Reforms in Securitised Debt Instruments to Align with RBI and Boost Market

The Securities and Exchange Board of India (SEBI) has proposed a set of regulatory changes aimed at improving the functioning of the securitised debt instruments (SDI) market, with a focus on reducing structural constraints and aligning its framework with that of the Reserve Bank of India (RBI), as per the PTI report. 

Single-Asset Securitisation May Be Allowed 

One of the key proposals is to permit single-asset securitisation structures for entities regulated by the RBI. 

Currently, regulations limit exposure to a single borrower within an asset pool, which restricts such structures. SEBI has indicated that relaxing this requirement could enable more transactions to be listed, especially where securitisation is backed by a single underlying asset. 

Changes To Trustee-Related Norms 

SEBI has also suggested modifying rules related to the role of trustees in securitisation transactions. 

Instead of requiring transactions to be terminated in cases where a trustee’s registration is suspended or cancelled, the regulator has proposed allowing replacement of the trustee. This approach is intended to ensure continuity and avoid disruption in existing transactions. 

Easing Restrictions on Group Transactions 

Another proposal involves relaxing norms that currently restrict transactions between an originator and a special-purpose entity within the same group. 

For RBI-regulated entities, Sebi is considering allowing such structures, subject to safeguards, to provide greater operational flexibility while maintaining regulatory oversight. 

Shift In Disclosure Responsibility 

SEBI has proposed transferring the responsibility for periodic disclosures on asset pool performance from the originator to the servicer. 

Since the servicer is directly involved in managing collections and monitoring underlying assets, this change is expected to improve the accuracy and timeliness of information available to investors. 

Board Composition of SPDEs To Be Revised 

The regulator has also recommended changes in the governance structure of special purpose distinct entities (SPDEs). 

Under the proposal, RBI-regulated originators would have limited representation on the SPDE board, without veto powers, to ensure independence and maintain arm’s length relationships. 

Objective: Market Development and Regulatory Alignment 

The proposed reforms are aimed at bringing SEBI’s framework in line with RBI regulations while addressing practical challenges faced by market participants. 

By easing certain structural limitations and improving operational clarity, the regulator seeks to encourage growth in the listed securitisation market. 

SEBI has invited public feedback on the proposals, with stakeholders given time until May 25 to submit their comments. 

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Conclusion 

SEBI’s proposed changes signal a move towards a more flexible and aligned regulatory environment, which could support broader participation and development in India’s securitised debt market. 

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions. 

Investments in the securities market are subject to market risks, read all the related documents carefully before investing.