To encourage NBFCs to securitise/assign their eligible assets, RBI had issued circular no. DNBR (PD)CC.No.95/03.10.001/2018-19 dated November 29, 2018, to NBFCs, relaxing the Minimum Holding Period (MHP) requirement for originating NBFCs, in respect of loans of original maturity above five years, to receipt of repayment of sixmonthly instalments or two quarterly instalments (as applicable). However, NBFCs are required to ensure that the Minimum Retention Requirement (MRR) for such securitisation/assignment transactions are 20% of the book value of the loans being securitised or 20% of the cash flows from the assets being assigned.
The above relaxations were extended till December 31, 2019 pursuant to circular no. DNBR (PD)CC.No.100/03.10.001/2018-19 dated May 31, 2019 and on a further review, have again been further extended till June 30, 2020 vide circular no. RBI/2019-20/131 DOR.NBFC (PD) CC.No.107/03.10.001/2019-20 dated December 31, 2019.
DSK Legal's Observations: RBI issued the above relaxations to assist NBFCs and housing finance companies overcome the liquidity shortage faced by them in the past financial year. The said relaxations are mainly aimed at helping housing finance companies and NBFCs, offering mortgage loans with a tenure more than five years, to raise more funds through the securitisation route, to create additional liquidity, by increasing their eligible portfolio available for securitisation.
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