SEBI Mandates Half-Yearly Detailed Disclosures By Trustees Of Special Purpose Distinct Entities To Boost Securitisation Transparency

New Delhi: Capital markets regulator Sebi on Tuesday mandated detailed and periodic disclosures by trustees of special purpose distinct entities to enhance transparency in securitisation transactions, requiring reporting across multiple credit, recovery, and asset-pool parameters. Under this, the regulator mandated half-yearly reporting by trustees of special purpose distinct entities across a wide range of credit, recovery, and structural parameters.

In its circular, Sebi said that trustees of special purpose distinct entities will have to submit these disclosures on a half-yearly basis to the regulator and to the stock exchanges where the SDIs are listed, within 30 days from the end of March or September. The provisions of the circular will come into effect from March 31, 2026, it added.

Under the disclosure, entities are required to disclose whether any top-up or additional loans have been extended after securitisation against the same security or to the same borrower, according to a circular issued by the regulator. In addition, changes in credit quality must be reported, including any increase in the probability of default since the previous disclosure and the number of exposures impacted.

Trustees will also need to disclose the expected credit loss on underlying loans, debt securities or credit facilities, along with any change from earlier disclosures. Details of recovery actions, such as collections from overdue accounts since the last reporting period, must also be provided. The disclosure framework further requires reporting on the utilisation of credit enhancements, including excess interest spread, cash collateral, over-collateralisation, subordination, guarantees, or any other form, as well as the use of liquidity facilities.

Sebi said the disclosures will also capture any amendments made after securitisation. This includes changes to documentation or payment terms of the underlying exposures, along with brief details of any material amendments. Further, trustees will be required to provide information on the characteristics of the asset pool, such as industry-wise and state-wise distribution in the case of mixed pools. Any defaults observed in collection or servicing functions being carried out on behalf of the securitisation trust must also be disclosed.

The regulator has also emphasised reporting on compliance with the Minimum Holding Period (MHP). This includes disclosure of the prescribed regulatory requirement, the weighted average holding period of assets at the time of securitisation, and the minimum and maximum holding periods of the securitised assets.

For securitisation of other exposures, the disclosure requirements have been expanded to include the weighted average maturity of underlying assets and details of the Minimum Retention Requirement (MRR). Entities will need to report the prescribed MRR, actual retention levels, and the form of retained exposure, such as credit enhancement, investment in senior tranches, liquidity support, or other specified forms.

Also, credit quality disclosures will cover deviations in collections from projected cash flows, ageing of overdue receivables, defaults by significant obligors, prepayment rates, recovery actions, and the utilisation of credit enhancement and liquidity facilities. Any post-securitisation amendments, material events affecting the originator's performance, defaults in servicing functions, and available credit support for future receivables will also be disclosed, along with compliance with MHP norms. 

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