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Stressed Asset Securitisation Allowed by RBI: Notes

15 April 20251 min read
BANKING & FINANCEStressed AssetSecuritisationAllowed by RBI:Notes15 April 2025safalsetu.com

Why in the news

RBI permitted market-led securitisation of stressed assets, which should draw foreign portfolio investors and private credit funds into India’s thin high-yield debt market.

Key facts

  • Lenders may pool NPAs or stressed loans into tradable securities.
  • Likely buyers: FPIs, distressed debt funds, private credit players, attracted by yields above those of junk bonds.
  • Personal loans and credit cards were 52% of new retail NPAs from April to September 2024.
  • Banks can securitise retail and SME stressed assets instead of selling to ARCs at 90-95% haircuts.

Benefits

  • Balance sheet relief and better capital use for banks.
  • Deeper stressed-asset market with new investors.
  • Extra resolution route beside ARC sales and one-time settlements.
  • Retail risk shared among many investors.

Exam angle

  • Terms: securitisation, ARC, haircut.
  • Regulator: RBI.

Test yourself

1. What did the RBI allow lenders to do under the stressed asset securitisation move?

Lenders can pool NPAs or stressed loans into tradable securities.

2. Between April and September 2024, which loans made up 52% of new retail NPAs per the securitisation notes?

Personal loans and credit card dues formed 52%.

3. By how much did securitisation of standard loans rise in FY25, per India Ratings in the RBI securitisation notes?

It reached Rs 2.3 trillion, up 25% year on year.