Indian Securitization Market: A Primer

Abstract

Securitization started in India in the early 1990s and grew slowly but steadily, producing annual issuance volumes in the range of USD 3 billion to USD 6 billion in recent years. Regulatory and taxation issues have sometimes created obstacles to the market’s growth, but the market now appears to have resolved those challenges. The market includes two forms of transaction structures: direct assignments and pass-through certificates. Direct assignments resemble whole loan trades in other jurisdictions, while pass-through certificates include the familiar feature of a special-purpose vehicle that holds a deal’s assets and serves as the issuer of the deal’s securities. Policies by the Reserve Bank of India require certain lenders to meet lending volume targets in designated “priority sectors.” Those requirements have encouraged direct assignment transactions over the past several years, but now the market is likely to shift back to greater use of the pass-through structure.