The Reserve Bank of India (RBI) on November 28, 2025, released the Reserve Bank of India (Small Finance Banks – Securitisation Transactions) Directions, 2025, for public comments. The aims to establish a prudential framework for Small Finance Banks (SFBs) to participate in the securitisation market primarily as originators and providers of associated credit enhancement or liquidity support. It outlines key definitions, eligibility norms for assets, and operational safeguards to ensure transparent and stable securitisation practices while protecting investor interests and maintaining financial stability.
The Directions prescribe detailed criteria on Minimum Retention Requirement (MRR), Minimum Holding Period (MHP), origination standards, payment priorities, and limits on total retained exposures. SFBs must retain a specified portion (5–10%) of the securitised assets to ensure continued credit discipline and accountability. Restrictions are placed on re-securitisation, synthetic structures, and revolving credit facilities, while eligible underlying assets must be standard loans meeting MHP criteria. The framework also mandates clear disclosure of payment hierarchies, triggers, and legal rights of investors to prevent opacity and safeguard against systemic risks.
Further, the sets conditions for *Special Purpose Entities (SPEs)* to ensure arm’s-length transactions, independence from originators, and bankruptcy remoteness. The minimum investment ticket size for securitisation notes is fixed at ₹1 crore, with listing recommended for enhanced transparency. These provisions aim to promote safe, simple, and transparent securitisation transactions, thereby supporting liquidity and credit flow in the financial system without compromising prudential standards.
These Directions shall come into force with immediate effect.
[Notification No. RBI/DOR/2025-26/191 DOR.STR.REC.No.110/21-04-177/2025-26]
