Market regulator Securities and Exchange Board of India (SEBI) is planning to put in place stricter norms, including minimum net worth requirement, for trustees managing issuance of securitised debt instruments.
Besides, SEBI is looking to come out with a standardised term sheet for securitisation transactions that cover both public issues and private placements.
These proposal, aimed at rationalising and making clear the roles and responsibilities of securitisation trustees, is likely to be discussed at SEBI's board meeting Thursday, sources said.
Generally, securitisation refers to creating a financial instrument by pooling various debt instruments and then selling them to investors.
SEBI may specify a minimum net worth requirement of Rs2 crore for these trustees.
Further, the trustees would be required to have at least two persons and between them, they need to have a minimum experience of five years in activities related to securitisation.
Currently, any person registered as securitisation firm or a reconstruction company with Reserve Bank of India (RBI), NABARD, NHB can act as securitisation trustees.
Under the proposed norms, the trustee may call for periodic reports, supervise the implementation of conditions regarding creation of security for securitised debt instruments and take steps to ensure protection of investors as well as resolve their grievances.
Scheduled commercial banks and public finance institutions may be allowed to act as trustees for a securitisation transaction.
Besides, they may appoint a compliance officer for performing duties including monitoring compliance of the various rules and redress of investor grievances.
The trustees need to ensure on a continuous basis that the trust property is available and adequate at all times to pay the securitised debt instrument holders.
As per a code of conduct for the trustees, they are required to avoid possible conflict of interest.
As part of the new procedures, SEBI board would make necessary amendments to the SEBI (Public offer and Listing of Securitised Debt Instruments) Regulations.
Earlier in August, SEBI had issued a concept paper on securitisation transactions.