SEBI Grade A Current Affairs — 5 May 2026

SEBI issued a consultation paper on May 4, 2026, seeking amendments to the 2008 regulations governing issuance and listing of securitised debt instruments and security receipts. The paper aims to modernize the regulatory framework for asset-backed securities and security receipts issued by Asset Reconstruction Companies. Key areas include eligibility criteria, disclosure requirements, and listing procedures. Public comments are being sought to refine the regulatory approach for these debt instruments in India's evolving securitisation market.

This consultation paper represents SEBI's effort to update decade-old regulations governing securitised debt instruments (like mortgage-backed securities, asset-backed securities) and security receipts issued by ARCs when they acquire stressed assets from banks. The 2008 regulations were drafted when India's securitisation market was nascent. Since then, the market has evolved significantly with increased ARC activity, growing retail participation in debt markets, and new financial instruments. The amendments likely address gaps in investor protection, enhance disclosure standards, and align with international best practices. For ARCs, clearer listing norms could improve liquidity for security receipts, making stressed asset resolution more efficient. The consultation process reflects SEBI's consultative approach to regulation-making, ensuring market participants can provide input before final rules are notified. This is particularly important given the technical nature of securitisation and the need to balance innovation with investor protection in India's expanding debt capital markets.

SEBI proposed amendments to Securitised Debt Instruments (SDI) rules on May 4, 2026, to boost listed securitisation market growth. Key changes include allowing single-asset securitisation by RBI-regulated entities, removing 25% single obligor exposure cap, replacing mandatory scheme winding-up with trustee replacement, permitting intra-group transactions for RBI-regulated originators, shifting periodic disclosure responsibility from originator to servicer, and limiting RBI-regulated originators to one non-veto board member on SPDEs. Public comments invited till May 25, 2026.

These proposed changes address structural bottlenecks in India's securitisation market by harmonising SEBI and RBI frameworks. The current 25% single obligor cap prevented listing of single-asset securitisation—common structures like loan against property or vehicle financing that RBI permits but SEBI's diversification rule blocked. The mandatory scheme winding-up upon trustee issues created regulatory inconsistency since RBI doesn't allow unwinding of live securitisation transactions. Shifting disclosure responsibility to servicers ensures better information flow as they actually monitor collections and recoveries. Allowing intra-group transactions between RBI-regulated originators and their SPDEs removes artificial restrictions while maintaining regulatory oversight. The board composition changes ensure arm's length transactions by limiting originator influence on SPDE decisions. These reforms aim to increase SDI listings, provide banks alternative funding sources, and deepen India's debt capital markets. Currently, securitisation remains concentrated in private placements rather than listed instruments, limiting liquidity and price discovery. By aligning regulations, SEBI seeks to unlock institutional investor participation and create a vibrant secondary market for asset-backed securities.