RBI’s Draft Directions on Securitisation of Stressed Assets, 2025 (Released on April 9, 2025)

The Reserve Bank of India has released Draft Guidelines on Securitisation of Stressed Financial Assets (SSFA), on April 9, 2025, which is a step forward in building a regulatory framework for selling and resolving NPAs through market-based structures. These guidelines reflect many of the ideas and suggestions that ELP had put forward in response to RBI’s 2023 Discussion Paper, particularly around the need for clear rules on pooling of stressed assets, independence of Resolution Managers, checks on related party involvement, fair valuation, etc. One important area the draft guidelines touch upon is the use of supporting facilities like credit enhancement, liquidity support, and underwriting. These facilities are already addressed in RBI’s 2021 Directions on securitisation of standard assets and have now been extended, with some changes, to stressed asset transactions as well. However, the draft stops short of addressing a practical issue especially what happens if a borrower whose loan is securitised shows signs of revival but needs fresh funding to survive? As things stand, once the loan is transferred to a securitisation vehicle (SPE), the door for new lending, especially from the same bank, is effectively closed. This write-up delve upon the requirements and procedural aspect of the draft guidelines.

Read the detailed alert here