CRISIL's analysis of the securitisation markets post the introduction of the RBI guidelines indicates that issuances have continued to show a steady trend, despite the fact that the guidelines are yet to be finalised.

In April 2005, the Reserve Bank of India (RBI) issued a set of draft guidelines (guidelines) governing the securitisation of standard assets. These guidelines, applicable to banks, financial institutions and non-banking financial companies, are aimed at ensuring healthy development of the securitisation market.

Says Ramraj Pai, head, structured finance ratings, CRISIL, "There has been a distinct increase in market interest in securitisation. The guidelines have accorded regulatory recognition to the product, enabling market participants to consider a greater involvement in securitisation issuances".

The guidelines have provided credibility and regulatory recognition to securitised paper. Newer classes of investors, notably public sector banks, have started investing in these instruments, a development that promises to deepen the market. From the origination side, almost all market participants have taken cognisance of the guidelines, and structured fresh issuances which could be considered compliant.

Notwithstanding the positives, the "draft" nature of the guidelines, could impact growth going forward. Some originators have preferred to "wait and watch" and have stayed away from the market. Clarity on several issues, such as capital treatment on second loss credit enhancements, manner of implementation of these guidelines (prospectively or retrospectively), and regulatory treatment on direct assignment transactions is awaited. The issuance of final guidelines and clarifications on pending issues will provide a strong impetus for continued market development.