The Reserve Bank of India (RBI) has unveiled significant draft amendments to its securitisation transaction regulations, proposing a mandatory minimum investment of ₹1 crore for securitisation notes. These instruments will also be exclusively issued and traded in dematerialised (demat) form. These changes, set to take effect from October 1, 2026, aim to reshape India's securitisation market by enhancing transparency and primarily targeting institutional investors.
What are Securitisation Notes?
Securitisation is a financial process where banks and other financial institutions pool various loans—such as home loans, vehicle loans, or personal loans—and transfer them to a Special Purpose Entity (SPE). This SPE then issues 'securitisation notes' to investors, which are backed by the consistent cash flows generated from the repayments of these underlying loans. Investors purchasing these notes receive returns derived from these repayments.
For banks, this mechanism offers several benefits: it helps free up capital, improves their liquidity, and allows them to transfer a portion of the credit risk associated with the loans to investors.
Key Proposed Changes by the RBI
The RBI's draft amendments introduce two primary shifts in the securitisation framework:
- Mandatory Dematerialisation: All securitisation notes must be issued, held, and transferred solely in dematerialised (demat) form. This move is intended to boost transparency, streamline operational efficiency, simplify transfers, and reduce the reliance on physical paperwork within the financial system.
- Minimum Investment Threshold: A new minimum investment size of ₹1 crore has been proposed for all securitisation notes. This threshold applies both at the initial issuance stage and for any subsequent transfers in the secondary market. The RBI clarifies that this amount refers to the investment made by a single investor, and agreements between the originator and the SPE must incorporate provisions to ensure compliance.
Additionally, the RBI plans to revise the definition of a "public offer" for these notes. Under the draft, an offer will be considered public if it reaches a number of persons that meets or exceeds the limit specified under Regulation 21 of the SEBI (Issue and Listing of Securitised Debt Instruments and Security Receipts) Regulations, 2008.
Implications for Investors
The introduction of a ₹1 crore minimum investment effectively narrows the pool of potential investors. Participation will largely be limited to institutional entities such as banks, insurance companies, mutual funds, and pension funds, alongside ultra-high-net-worth individuals. Consequently, direct participation from retail investors is expected to be minimal due to this high entry barrier.
This measure is also anticipated to elevate the overall quality of participants in the securitisation market. Investors capable of evaluating intricate debt structures are generally better equipped to assess the inherent credit risks associated with diverse loan portfolios.
The mandate for demat-only securitisation notes is poised to simplify ownership transfers, enhance record-keeping accuracy, and further align India's securitisation market with the broader digitisation initiatives underway across the nation's financial landscape.
Why These Changes Matter
India's securitisation market has experienced consistent growth, serving as an increasingly vital tool for banks to manage their balance sheets and diversify funding sources. By standardising the issuance process, reinforcing transfer mechanisms, and directing participation towards sophisticated investors, the RBI aims to bolster market transparency and foster the orderly development of the entire securitisation ecosystem.
These draft amendments are currently open for consultation. If finalised, their implementation on October 1, 2026, will mark a significant evolution in how securitisation notes are issued and traded across India.