Sebi proposes Rs 1 cr min investment for securitised debt instruments

Sebi on debt instruments: Markets regulator Sebi has proposed a minimum ticket size or investment threshold of Rs 1 crore for RBI -regulated originators and unregulated entities engd in securitisation activities.

proposal also introduced limitations on number of investors in private placements, allowing securitized debt instruments (SDIs) issued privately to be offered to a maximum of 200 investors. If this limit is exceeded, issuance must be classified as a public issue.

Public offers should remain open for a minimum of three days and a maximum of 10 days, with advertisement requirements aligned with Sebi's regulations for n-convertible securities.

Additionally, regulator has suggested that all securitized debt instruments should be issued and transferred exclusively in demat form.

SDIs are financial products created by pooling toger various types of debt -- such as loans, mortgs, or receivables -- and n selling m as securities to investors. This process, kwn as securitisation, allows originator (such as a bank) to convert illiquid assets into liquid ones, providing an alternative source of funding.

Investors in se instruments receive returns based on performance of underlying debt pool, and risk is spread across multiple assets, offering potentially attractive returns.

current framework is based on Sebi's 2008 regulations, with updates from Reserve Bank of India's (RBI) 2021 directions on securitising standard assets.

Securities and Exchange Board of India (Sebi) is w considering updates to regulatory framework for securitized debt instruments and sought public comments till vember 16 on proposals.

Regarding risk manment, Sebi has proposed that originators retain a minimum risk retention of 10 per cent of securitised pool or 5 per cent for receivables with a maturity of up to 24 months.

A minimum holding period requirement will also be specified by Sebi for underlying receivables to ensure that originators maintain an interest in underlying assets, regulator said in a consultation paper.

regulator furr suggested including an optional clean-up call for originators, allowing m to repurchase up to 10 per cent of original value of assets. This call is optional and intended to help man pool's longevity without mandating additional commitments from originator.

Liquidity facilities, essential to handle timing mismatches in cash flows, should eir be provided directly by originator or through an appointed third party.

updated definition of "debt/receivables" limits permissible underlying assets to listed debt securities, accepted trade receivables, rental incomes, and equipment leases while disallowing single-asset securitisation.

proposal establishes minimum track record requirements for both originators and obligors. Originators should have a minimum of three years of operating experience, while trade receivables specifically require at least two cycles of successful, default-free payments.