The recently published report on securitization from a working group of India's central bank, the Reserve Bank of India, has been praised by market participants.
The report welcomed the increasing use of securitization in India, in particular the benefits it offers in the mortgage and infrastructure sectors, but noted the impediments that get in the way of a fully fledged asset backed market. It also welcomed the prospect of future flow and distressed asset deals.
In the short term, key recommendations include the reduction of stamp duties, allowing mutual funds to invest in ABS, tax neutrality for SPVs and other tax changes. In the longer term, the report also suggested that the government should introduce umbrella legislation governing the whole of the securitization market.
"We are impressed [with the report]," said Arun Sharma, the head of the International Finance Corp.'s structured finance group, which organized a trip to the U.S. for members of the working group and helped them draw up their recommendations.
"We certainly commend the Reserve Bank for taking the initiative for this report and leading a concerted effort to improve the securitization climate in India."
He added that the implementation of the report is a big task since it involves new legislation, but given the potentially important role securitization can play in mobilizing finance for the domestic infrastructure and other key sectors, it should receive official support. The IFC is prepared to help with this process, he said.
The report is available on the Reserve Bank's website at www.rbi.org.in/sec21/10788.pdf