Sustainable securitisat­ion where profit alone wo­uld not be the sole motive would be the

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main criteria for the Reseve Bank of India while issuing final gu­idel­ines on securitisation, said Shyamala Gopi­nath, RBI deputy governor, said.

“RBI is examining the re­sponses and the final gu­idelines for banks as well as NBFCs will be issued after taking into account the fe­edback. However, there was no specific timeframe for coming out with final nor­ms on securitisation,” she said, speaking at the India Securitisation Summit.

She said RBI would be uncomfortable if banks se­curitise their assets only fr­om a profit motive. “Banks should appreciate that if tr­ansactions are being done to avoid restrictions on pro­fit booking and higher capital requirements for credit enhancements, RBI would have concerns,” she said.

“NBFCs have asked for some ki­nd of differential tr­eatment. We are looking at all the issues. We also have a technical advisory commi­ttee on markets. We will al­so get th­eir feedback before we put out the final gui­delines,” Go­pinath said.

Gopinath said there is a view that given the intrinsic nature of loans given by the NBFCs, particularly in the microfinance sector, stringent requirements may hamper lending in these critical areas, like microfinance. On the other hand, there is the regulatory arbitrage issue that necessitates ensuring that the incentive structures do not again result in a shadow banking system.

In April, RBI had relea­sed draft guidelines for securitisation suggesting that banks must hold on to a lo­an for at least nine months before converting it into a securitised asset. Securitisation of assets, or bundling together loans into one security that can then be traded, was allowed and banks quic­kly turned to it as a means to hedge their interest rate risk. But banks want the mi­nimum holding period and retention requirement to be reduced.

Post economic slowdo­wn, many of the pitfalls of the securitisation market have come to the fore, she said. “The downside of sec­uritisation that has come to the fore is the absence of alternative solutions available to borrowers to restructure their loans when there is a downturn with the originator since the banker –customer relationship is snapp­ed when the loans are securitised,” Gopinath added.