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RBI/2013-2014/55
DNBS (PD) CC.No.33/SCRC/26.03.001/ 2013-2014
DNBS (PD) CC.No.33/SCRC/26.03.001/ 2013-2014
July 1, 2013
Master Circular on directions/ instructions issued to the Securitisation Companies/Reconstruction Companies
As you are aware, in order to have all current instructions on
the subject at one place, the Reserve Bank of India issues updated
circulars/ notifications. A gist of circulars issued by the Bank to
Securitisation Companies/ Reconstruction Companies updated as on June
30, 2013 is given in the Annex. The detailed circulars have also been placed on the RBI web-site (http://www.rbi.org.in).
Yours faithfully,
(N.S.Vishwanathan)
Principal Chief General Manager
Principal Chief General Manager
(1) Submission of application for a Certificate
of Registration to commence/ carry on the business of a Securitisation
Company or Reconstruction Company
The Securitisation Companies or Reconstruction Companies seeking
registration from the Reserve Bank of India shall submit their
application in the format (Annexed to Notification No. DNBS. 1/CGM
(CSM)-2003 dated March 7, 2003) specified by the Bank, duly filled in
with all the relevant annexures/ supporting documents to the Chief
General Manager-in-Charge, Department of Non-Banking Supervision,
Central Office, Reserve Bank of India, Centre 1, World Trade Centre,
Cuffe Parade, Colaba, Mumbai 400 005.
(2) Maintenance of minimum owned fund for carrying out the business of securitisation or asset reconstruction
The Bank had issued the guidelines vide Notification No.DNBS.4/CGM
(OPA)-2004 dated March 29, 2004 that for commencing the business of
securitisation or asset reconstruction the minimum owned fund shall be
an amount not less than 15% of the total financial assets acquired or
to be acquired by the Securitisation Company or Reconstruction Company
on an aggregate basis or Rs.100 crore whichever is lower, irrespective
of whether the assets are transferred to a trust set up for the purpose
of securitization or not. Further, the Securitisation Company or
Reconstruction Company should continue to hold this owned fund level
until the realization of the assets and redemption of security receipts
issued against such assets. The Securitization Company or
Reconstruction Company can utilize this amount towards the Security
Receipts issued by the trust under each scheme. This will ensure the
stake of the Securitisation Company or Reconstruction Company in the
assets acquired.
(3) Commencement of business by Securitisation Companies/ Reconstruction Companies
The
Bank had issued the guidelines vide Notification No.DNBS.6/CGM
(PK)-2006 dated October 19, 2006 that the Securitisation Company or
Reconstruction Company should commence business within six months from
the date of grant of Certificate of Registration. The Bank may on
application made by SC/RC grant extension of time beyond six months but
in no case such extension of time shall exceed 12 months from the date
of grant of Certificate of Registration.
(4) Submission of quarterly statements by Securitisation Companies/ Reconstruction Companies
Quarterly
Statement in the formats viz. SCRC1 & SCRC2 on assets acquired,
securitized and reconstructed are to be submitted by Securitisation
Companies/ Reconstruction Companies registered with the Reserve Bank of
India under Section 3(4) of the Securitisation and Reconstruction of
Financial Assets and Enforcement of Security Interest Act, 2002 within
15 days of close of the quarter to which it pertains. The first such
statement was to be with reference to quarter ending March 31, 2007.
(5) Regulation of SCs/ RCs- Submission of returns and audited balance sheet by SCs/ RCs
All
the SCs/RCs registered with the Bank were advised to furnish the
position of Owned Fund in Quarterly Statement SCRC1 as item No.1 and
also furnish a copy of audited balance sheet along with the
Directors' Report/ Auditors' Report every year within one month from
the date of Annual General Body Meeting, in which the audited accounts
are adopted, starting with the balance sheet as on March 31, 2008.
(6) Investment in Security Receipts issued by the trusts floated by Securitisation Companies/ Reconstruction Companies
The
Bank had issued the guidelines vide Notification No.DNBS.5/CGM
(PK)-2006 dated September 20, 2006 that the Securitisation Company or
Reconstruction Company shall invest in the Security Receipts issued by
the trust set up for the purpose of securitisation, an amount not less
than 5% under each scheme with immediate effect. In case of those
SC/RCs which have already issued the SRs, such SC/RCs shall achieve the
minimum subscription limit under each scheme within a period of 6
months from the date of issue of guidelines in the matter.
(7) Guidelines on Declaration of Net Asset Value of Security Receipts issued by Securitisation Company/Reconstruction Company
In order to enable the Qualified Institutional Buyers to know the
value of their investments in the Security Receipts issued by the
Securitisation Company/ Reconstruction Company, the Securitisation
Companies/ Reconstruction Companies registered with the Bank under the
Securitisation and Reconstruction of Financial Assets and Enforcement
of Security Interest Act, 2002, were advised to declare Net Asset Value
of the Security Receipts issued by them at periodical intervals.
(8) Regulation of SCs/ RCs-Disclosure while issuing Security Receipts (SRs)
Further
to para 7 of circular DNBS (PD) CC. No. 6/SCRC/10.30.049/2006-07 dated
May 28, 2007, SCs/RCs were advised that in order to enable the
investors to make informed investment decision in the SRs, the
disclosure in respect of underlying basket of assets required to be
made by SCs/ RCs in the offer documents, include disclosure in respect
of the date of acquisition of the assets, valuation of the assets and
the interest of SCs/ RCs in such assets, at the time of issue of SRs.
(9) Quarterly Statement to be submitted by
Securitisation Companies/Reconstruction Companies registered with the
Reserve Bank of India under Section 3(4) of the SARFAESI Act
Based
on the experience gained, the Bank has revised the formats of
quarterly statements SCRC 1 and SCRC 2 to be submitted by
Securitisation Companies/Reconstruction Companies registered with the
Bank. As earlier, the statements should be submitted within 15 days of
the close of the quarter to which it pertains, to the Department of
Non-Banking Supervision, Central Office, Reserve Bank of India, 2nd
floor, "B" Wing, World Trade Centre, Centre I, Cuffe Parade, Colaba,
Mumbai 400005. The first such statement in revised format should be
forwarded for the quarter ending December 31, 2008.
(10) Acquisition of financial assets by Securitisation Companies/ Reconstruction Companies (SC/RCs) - Clarifications
A Securitisation Company/ Reconstruction Company is neither a ‘bank’
in terms of provisions of Section 2(1)(c) of the SARFAESI Act, 2002 nor
a ‘financial institution’ in terms of provisions of Section 2(1)(m) of
the said Act. Therefore, acquisition of financial assets by one SC/ RC
from another SC/ RC will not be in conformity with the provisions of
the SARFAESI Act, 2002.
‘Restructuring of loans by SC/ RC’ is one of the measures
allowed to be undertaken by SCs/RCs for realisation of their dues. As
such, there is no bar on SCs/RCs deploying their funds for undertaking
restructuring of acquired loan account with the sole purpose of
realizing their dues.
(11) Resolution of acquired assets - Extension in time frame for redemption of security receipts (SRs) issued
In terms of paragraph 7(6)(ii) of “The Securitisation Companies and
Reconstruction Companies (Reserve Bank) Guidelines and Directions,
2003” dated April 23, 2003 (hereinafter called 'guidelines') it has
been prescribed that the plan of realisation of assets shall not exceed
five years from the date of acquisition of asset. Certain
Securitisation Companies/ Reconstruction Companies (SCs/ RCs) which had
not been able to realize the financial asset acquired within the given
time frame, represented to the Bank seeking extension in time frame
for resolution of financial assets. Taking into account the
representations received, as an interim measure, the Bank has accorded
permission to give an extension of two more years for realisation of
the assets in respect of the security receipts (SRs) issued by SCs/
RCs, which have completed five years.
The provisions of extant guidelines as per paragraph 7(6)(ii)
of the guidelines would apply to all other SRs issued by the SCs/ RCs.
(12) Guidelines on "the Change in or Take Over of
the Management of the Business of the Borrower by Securitisation
Companies and Reconstruction Companies (Reserve Bank) Guidelines, 2010"
The
Reserve Bank of India had issued for the first time circular/
guidelines on the captioned subject enabling the SCs/RCs registered
with the Bank to take recourse to measure outlined in Section 9 (a) of
the SARFAESI Act, 2002 dealing with the issue.
13 The Securitisation Companies and Reconstruction Companies (Reserve Bank) Guidelines and Directions, 2003
The
Bank had issued Notification No. 2 dated April 23, 2003 providing the
framework for regulation of Securitisation Companies/ Reconstruction
Companies (SCs/RCs). In the light of experience gained over the years
and to ameliorate the difficulties faced by such companies in complying
with the guidelines, following changes were made applicable with
effect from the date of the Notification.
a. It is clarified to SCs/ RCs that they can acquire the
assets either in their own books or directly in the books of the trusts
set up by them.
b. The period for realisation of assets acquired by SCs/ RCs
can be extended from 5 years to 8 years by the Board of Directors of
the SC/ RC subject to certain conditions.
c. Additional avenues for deployment of surplus funds with
NABARD and SIDBI are being provided to SCs/RCs. An upper limit of 10%
of the owned funds has been stipulated for the investment of SCs/ RCs
in land and buildings for their own use.
d. It is being stipulated that any asset / Security Receipt
which remain unresolved/ not redeemed as at the end of five years or
eight years will now be treated as loss asset.
e. With a view to bringing transparency and market discipline
in the functioning of SCs/ RCs, additional disclosures related to
assets realised during the year, value of financial assets unresolved
as at the end of the year, value of security receipts pending for
redemption etc. are prescribed.
(14) The Securitisation Companies and Reconstruction Companies (Reserve Bank) Guidelines and Directions, 2003
In partial modification to Notification No. 5 dated September 20,
2006, it is made mandatory that the Securitisation Company or
Reconstruction Company shall continue to hold a minimum of 5% of the
Security Receipts of each class issued by the SC/RC under each scheme
on an ongoing basis till the redemption of all the Security Receipts
issued under such scheme.
(15) Submission of information to Credit Information Companies
In terms of Section 2(f)(ii) of the Credit Information Companies
(Regulation) Act, 2005, securitisation companies/reconstruction
companies (SCs/RCs) are also covered under the definition of “credit
institution”. Further, the Credit Information Companies (Regulation)
Act provides that every credit institution in existence shall become a
member of at least one credit information company. Thus, all SC/RCs
being 'credit institutions' are required to become a member of at least
one credit information company as per the statute.
(16) Setting up of Central Electronic Registry
under the Securitisation and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002
Pursuant
to the announcement made by the Finance Minister in the budget speech
for 2011-12, Government of India, Ministry of Finance notified the
establishment of the Central Registry vide notification F. No.
56/05/2007-BO-II dated March 31, 2011. The objective of setting up of
Central Registry is to prevent frauds in loan cases involving multiple
lending from different banks on the same immovable property.
The Central Registry of Securitisation Asset Reconstruction
and Security Interest of India (CERSAI), a Government Company licensed
under Section 25 of the Companies Act, 1956 has been incorporated for
the purpose of operating and maintaining the Central Registry under the
provisions of the Securitisation and Reconstruction of Financial
Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act).
Ozg NBFC Consultant
Ozg Center | Delhi | Mumbai | Chennai | Bangalore | Kolkata
Back Office Phone # 09811415831-37-61-72-84-92-94
