Sebi allows listing of securitized debt instruments

Sebi allows listing of securitized debt instruments

Mumbai: The Securities and Exchange Board of India (Sebi) on Thursday allowed the listing of securitized debt instruments and published the disclosure norms for issuers on its website.

Pass through certificates, or PTCs, are popular securitized debt instruments. Banks and non-banking finance companies are the originators of such instruments.

When these lenders consume their finance limits and want to utilize their loan books for further capital, they often sell their loan books to an entity, commonly termed as special purpose vehicle, which in turn issues debt papers bearing a certain coupon, based on the nature of the loan. These instruments are mostly issued over auto loans, credit card outstandings and mortgages. The securitized debt market in India is estimated to be around Rs40,000 crore. Institutions such as mutual funds often subscribe to these papers.

So far, detailed information about securitized debt instruments, the assets and loans on which these instruments are issued, their originators, their strength, and risks involved in such issuances are available with credit rating agencies, as issuers often opt for credit ratings for such papers before selling them in the market.

These instruments are mostly sold to institutional investors, but following Sebi’s new guidelines, issuers will be able to float public issues of such instruments and sell them to retail investors as well, since all disclosures will be publicly available under listing norms.