Budget 2017: Listing of security receipts issued by ARCs to be allowed, says FM Arun Jaitley

NEW DELHI: To enhance capital flows into the securitisation industry and check bank NPAs, the government today announced allowing listing of security receipts issued by asset reconstruction companies on stock exchanges.

"Listing and trading of security receipts issued by a securitisation company or a reconstruction company under the SARFAESI Act will be permitted in Sebi registered stock exchanges," Finance Minister Arun Jaitley said in his Budget for 2017-18.

This will enhance capital flows into the securitisation industry and particularly be helpful to deal with bank non-performing assets (NPAs), he added.

Security receipt, in market parlance, means a receipt or other security issued by a securitisation company or reconstruction company.

Experts hailed the announcement, saying such a move will help speed up cleansing bad assets in the banking system and boost liquidity in the securitisation industry.

Sai Venkateshwaran, Partner and Head, Accounting Advisory Services, KPMG in India, said this needs to be done with adequate safeguards and possibly restricted to sophisticated investors who understand the risks associated with such instruments.

"It is a very welcome development which shall greatly aid in speeding up the bad assets cleansing from the banking system, promote Asset Reconstruction Companies (ARCs) and provide a systemic platform for efficient growth of the sector," said Abhijit Chakraborty, Chief Operating Officer, Metropolitan Stock Exchange of India.

Making a similar point, Khaitan & Co Partner Kartick Maheshwar said the proposal can allow ARCs to access capital markets for financing their acquisition of specific loan portfolios as well as obtain liquidity by selling exposure to specific portfolios in the public markets.

Previously, access to such loan portfolios was available only to qualified institutional buyers (QIBs), Maheshwar added.