|
Country
Writer: Mr Girish Dave
davegirish@vsnl.com
Dave & Girish
& Co
Tel:+
91-22-206 2132
www.lawindiadavegirish.com
SECURITIZATION LAWYERS
AT THIS FIRM
FIRM PROFILE
DAVE & GIRISH & CO., is a law firm specialised
in the practice of international finance and corporate law and has
offices at Bangalore and Bombay besides having associates in Delhi
and Ahmedabad
SECURITIZATION
MARKET STATEMENT
Current prevalent
trend in India is to securitize loan receivables and more so auto
loan receivables. However, credit card receivables and other business
receivables have also been securitized. The major market players
are Citibank and ABN Amro. Recently, Indian financial institutions
have also started participating in this area. These institutions
include The Housing Development and Finance Corporation and The
ICICI Bank Limited. The Housing Development Finance Corporation
is a housing finance corporation and also happens to be the pioneer
for the issue of Mortgage Backed Securitization in India. Huge capital
was mobilized by securitizing these housing loan receivables in
India.
Applicability
of Statutes:
The Indian Contract
Act, 1872, governs contracts for the securitization assignments.
Common law principles apply in India and no consent is required
from the debtor on the assignment of benefits under a contract by
the Creditor.
A few statutory
constraints hamper growth of this product in some states in India
like stamp duty on assignments, which vary from state to state.
Assignment of
the Mortgage Backed Securities so far has been without transfer
of the underlying security due to the prevalent stamp laws. However,
transfer of beneficial interest and right to receivables is possible
without the transfer of the underlying security.
Securitisation
has changed the finance market to a great extent in India. The Securitisation
& Reconstruction, Etc. Ordinance, 2002 (the "Ordinance")
defines securitisation as a means for acquisition of financial asset
by a securitisation company or a reconstruction company from an
originator whether by collecting of funds from such companies or
from institutional buyers by issue of security receipts representing
undivided interest in such financial assets.
Certain important
provisions of the Ordinance:
Û
Sale of underlying asset without going to any Court or Tribunal
in case of default by a borrower or assignor.
Û
Securitisation company has to obtain a certificate of registration.
Û
Must own funds of not less than Twenty Million Rupees or such other
amount not exceeding fifteen per cent of the total financial assets
acquired or to be acquired.
Û
Securitisation company should not have incurred any losses in any
of the three preceding financial years.
Û
Securitisation companies are permitted to issue securities in the
form of receipts.
Û
Issue of security receipts to be made only to Qualified Institutional
Buyers.
Û
No compulsory registration of security receipts with Land Registry.
Û
Rights or interest in assets may be acquired by payments in
cash or by issue bonds or debentures.
Û
notice to obligors and payment to the securitization company will
discharge the obligor.
Û
Securitisation companies are given special rights for enforcement
of securities.
Û
Reserve Bank of India is authorised to determine policies and issue
directions.
Û
central registry for registration of Securitisation transactions.
Û
no securitisation company can carry on securitization activities
without registering itself as Securitisation company within six
months of the Ordinance.
|
