The RBI working group recommends measures to relieve credit markets

BENGALURU: A working group created by the Reserve Bank of India ( RBI ) on Tuesday recommended a series of measures to develop a secondary market for corporate loans, including the easing of regulations to allow foreign portfolio investors (FPIs) to directly buy troubled loans from banks.

These measures aim to develop credit markets and occur at a time when the country faces a liquidity crisis between its shadow banks after the collapse of ILu0026FS, one of the largest shadow banks, last year.

FPIs, who so far were allowed to invest in stressed assets through asset reconstruction companies (ARCs), can directly participate in the bad loan market within an annual limit set by the RBI in consultation with the government, the task force recommended.

RBI’s task force also recommended easing rules around the securitisation of loan assets and permitting wider participation from funds and insurance companies in trading these securities, the central bank said.

He also proposed establishing a self-regulatory body to standardize loan documents and promote transparency in the secondary market.

RBI has posted the recommendations on its website for comments from stakeholders and they are subject to the central bank’s approval.

The working group was formed in May to review the current state of the loan market in India and make recommendations for the development of a secondary market for corporate loans.