Minimum Holding Period for Securitization of Loans by NBFCs Reduced

In order to encourage Non-Banking Financial Companies (“NBFCs”) to securitize/assign their eligible assets, it has been decided by RBI to relax the Minimum Holding Period (“MHP”) requirement in respect of loans of original maturity above five (5) years. The MHP requirement has been reduced from receipt of repayment of twelve (12) monthly installments to six (6) monthly installments (in case of monthly instalments) and from receipt of repayment of four (4) quarterly installments to two (2) quarterly instalments (in case of quarterly instalments).

However, the abovementioned relaxation shall apply to only those transactions, where the securitising / assigning NBFC retains with itself, atleast 20% of the book value of the securitized loan or 20% of the cash flows from the assigned assets.

It is also to be noted that the above dispensation shall be applicable to only those securitization / assignment transactions which are carried out during a period of six months from the date of issuance of this circular i.e. November 29, 2018.