SLMA launched to help secondary loan market

MUMBAI : Ten major banks, including the State Bank of India and icici Bank, gathered on Wednesday to create a secondary loan market association to promote the growth of the secondary loan market in India, and also unveil an online platform .

SLMA is a self-regulatory body and was formed in accordance with the recommendation of the Reserve Bank of India Working Group on Business Loan Secondary Market Development.

The other members of SLMA are Canra Bank, Standard Chartered Bank, Kotak Mahindra Bank, Deutsche Bank, Bank of Baroda, Punjab National Bank, Axis Bank and HDFC Bank.

According to the constitutive act of SLMA, it will facilitate, promote and set up an online system for the standardization and simplification of primary loan documentation, and the standardization of documentation for purchase and sale documentation / assignment and other negotiation mechanisms for the secondary loan market and its documentation.

The company’s website and logo were launched digitally on Wednesday by Saurav Sinha, executive director of the Reserve Bank of India.

Speaking at the event, Sinha said that an active secondary market for loans in India would provide benefits to various stakeholders through capital optimization, liquidity management, risk management, rebalancing of exposure and an effective price discovery mechanism.

He observed that since small banks are typically constrained for various reasons to participate in large and creditworthy loan exposures at the time of origination, the secondary market may allow them to participate in such exposures at a later stage. and the constraints encountered in the context of major exhibitions will be a thing of the past.

Sinha also focused on the essential prerequisites for a vibrant secondary market – an ecosystem of market intermediaries such as facility officers, security trustees, arrangers, rating agencies, and more.

Ashwini Bhatia, Managing Director, SBI, noted that conceptualizing and operationalizing SLMA within a limited time frame is an appropriate response to the long-felt need for broader participation in the loan market, aided by appropriate mitigation. risks. It will offer banks and other participants a window to manage their portfolio of loan assets, he added.

Bhatia pointed out that at present, the primary and secondary markets are limited to banks and non-bank financial corporations, and domestic and foreign investors only participate in distressed debt through the reconstruction companies. ‘assets.

“As such, there is a felt need to broaden the spectrum of secondary market investors and alternative investment funds / mutual funds to invest in the secondary loan market,” he said. .

Sanjay Srivastava, Chairman of SLMA, said the secondary loan market in India will evolve through a systematic digital loan exchange platform, document standardization, active stakeholder participation and a mechanism efficient price discovery.

Sunil Mehta, Managing Director of the Association of Indian Banks (IBA), said that at present the IBA is actively working on the development of the syndicated loan market in India and one of the key success factors for this market will be the parallel development of the secondary market for the sale of lend.

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