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RBI revises norms: Loans with residual maturity of less than 365 days cannot be securitised

finance | Dec 6, 2022 12:04 PM IST

RBI revises norms: Loans with residual maturity of less than 365 days cannot be securitised

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MMFSL had hit its 52-week high yesterday after the strong November business update. While the collection efficiency has improved to 96 percent and asset quality has remained stable, the company has seen disbursals drop 14 percent versus last month.

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The Reserve Bank of India (RBI) has revised its securitisation guidelines. Under the new norms, all loan disbursals and repayments are required to be executed only between the bank accounts of the borrower and the regulated entities (like banks and NBFCs) without any pass-through/ pool account of the Lending Service Providers (LSPs).
The amendment also says that any loan which has a residual overdue of less than 365 days cannot be securitized. This means that the lender, which are largely non-banking financial companies (NBFCs), cannot securitise that part of the portfolio with another lender.
Speaking to CNBC-TV18, about the same, Ramesh Iyer, Vice Chairman and Managing Director at Mahindra & Mahindra Financial Services (MMFSL), said that the new guidelines won’t impact their business.
“Normally we run a 30 months book. If 365 days of maturity cannot be securitised – that is not the portfolio that is offered. The portfolio that gets offered is where six months maturity is over and more than 24-30 months balance is left. So I don’t see that to be a major change,” he explained.
Financial sector analysts say that the new guidelines can have an impact on the overall securitization volume. Also, the quality of loans securitised will improve. Moreover, shorter-duration loans will get impacted as they cannot be securitised.
MMFSL had hit its 52-week high yesterday after the strong November business update. While the collection efficiency has improved to 96 percent and asset quality has remained stable, the company has seen disbursals drop 14 percent versus last month.
For more, watch the accompanying video
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