Subsequently, keeping in mind the lessons learnt from the financial crisis that struck the developed economies, international developments in regulation of securitisation market and our review of existing regulatory norms on booking of profit on transfer of assets, reset of credit enhancements and transactions involving transfer of loans through direct assignment, the Reserve Bank of India has released a draft circular on “Revisions to the Guidelines on Securitisation Transactions” to public comments on September 27, 2011.
The objective of the draft guidelines is to discourage the “originate to distribute” business model in which loans were originated with the sole intention of immediate securitisation and securitisation of tranches of project loans even before the total disbursement is complete, thereby passing on the project implementation risk to investors.