RBI task force suggests self-regulatory body to oversee secondary markets

Headed by Canara Bank Chairman, a task force set up by the RBI has recently submitted its report on a secondary market development for corporate loans.

T. N. Manoharan, chairman, Canara Bank, has recommended setting up of a self-regulatory body (SRB), which will keep a watch over the proposed secondary market.

The self-regulatory body can be set up as an association by scheduled commercial banks, public financial institutions and other related entities, and may be incorporated as a Section 8 company under the Companies Act, 2013. It must be set up within three months from the date of acceptance of the recommendations, the report added.

The above mentioned regulatory body’s role will be to standardize loan documentation and covenants, periodically review the documentation, ensure standardization of practices, and promote growth, liquidity, efficiency and transparency of the proposed secondary market.

It will also be responsible for setting up a central loan contract registry, which will finalize the detailed design structure, infrastructure, technological aspects and nature of incorporation, to ensure legal sanctity of its operations and for executing agreements with other agencies.