RBI Proposes Demat-Only Framework for Securitisation Notes

RBI Unveils Draft Reforms for Securitisation Market

RBI Proposes Demat-Only Framework for Securitisation Notes: The Reserve Bank of India (RBI) has released draft amendments to modernize India’s securitisation market by proposing that all Securitisation Notes (SNs) be issued, held, and transferred exclusively in dematerialised (demat) form. The proposal seeks to improve transparency, operational efficiency, liquidity, and investor protection in the country’s debt market.

The central bank has also proposed to retain the minimum investment limit of ₹1 crore, ensuring that the threshold remains applicable both at the time of issuance and during every subsequent transfer of Securitisation Notes.

Static GK fact: The Reserve Bank of India (RBI) was established on 1 April 1935 under the Reserve Bank of India Act, 1934. Its headquarters is located in Mumbai.

Understanding Securitisation Notes

Securitisation Notes (SNs) are financial instruments created by pooling income-generating assets such as loans and converting them into marketable securities for investors.

Common assets used in securitisation include:

• Home loans
• Vehicle loans
• Personal loans
• Other retail loan portfolios

These assets are transferred to a Special Purpose Entity (SPE), which issues Securitisation Notes to investors. The funds raised enable banks and Non-Banking Financial Companies (NBFCs) to generate fresh capital for additional lending.

Key Proposals in the Draft Framework

The RBI has proposed several regulatory measures to strengthen the securitisation ecosystem.

Major proposals include:

• Mandatory issuance, holding, and transfer of Securitisation Notes in demat form
• Retention of the ₹1 crore minimum investment requirement
• Mandatory compliance agreements between lenders and Special Purpose Entities (SPEs)
• Alignment of public issue classification with SEBI regulations

These measures are expected to improve efficiency while reducing operational risks associated with physical securities.

Static GK Tip: A demat account enables investors to hold securities electronically, eliminating the need for physical certificates and facilitating faster, safer, and paperless transactions.

Minimum Investment Requirement

The RBI has decided to continue the ₹1 crore minimum investment threshold for Securitisation Notes.

The investment requirement will remain applicable:

• At the time of issuance
• During every subsequent transfer

The draft framework also requires Special Purpose Entities (SPEs) to enter into formal agreements with lenders to ensure continuous compliance throughout the life cycle of the securitisation transaction.

Public Issue and Consultation Process

Under the proposed amendments, an issue of Securitisation Notes will be classified as a public issue if it is offered to the number of investors specified under SEBI regulations. This aligns the securitisation framework with India’s broader securities market regulations.

The RBI has invited comments from financial institutions, industry participants, investors, and other stakeholders. The deadline for submitting feedback is 27 August 2026, while the revised framework is proposed to come into effect from 1 October 2026.

Static GK fact: The Securities and Exchange Board of India (SEBI) was established in 1988 and became a statutory regulatory body in 1992 under the SEBI Act, 1992.

Significance of the Proposal

The proposed reforms will accelerate the digitisation of India’s securitisation market by promoting electronic record-keeping, improving transparency, reducing settlement risks, and strengthening regulatory oversight. The framework is expected to enhance investor confidence, improve market liquidity, and support the long-term development of India’s debt and capital markets.

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RBI Proposes Demat-Only Framework for Securitisation Notes: