Launch of Slma to help the secondary lending market

Bombay : Ten major banks, including State Bank of India and Icici Bank, came together on Wednesday to establish a secondary lending market association to promote the growth of the secondary lending market in India, and also unveil an online platform.

SLMA is a self-regulatory body and was established on the recommendation of the Reserve Bank of India’s Task Force on Development of Secondary Business Loan Market.

Other SLMA members are canra bank, Standard Chartered Bank, Kotak Mahindra Bank, Deutsche Bank, Bank of Baroda, Punjab National Bank, Axis Bank and HDFC Bank.

According to SLMA’s memorandum of association, it will facilitate, promote and implement an online system for standardization and simplification of primary loan documentation, and standardization of documentation for purchase and sales documentation. /assignment and other trading 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 an active secondary loan market in India will deliver 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 generally constrained, for various reasons, to participate in large and solvent loan exposures at the time of origination, the secondary market can allow them to participate in such exposures at a later stage. and the constraints encountered under the Large Exposure Framework will be a thing of the past.

Sinha also emphasized the essential prerequisites for a vibrant secondary market – an ecosystem of market intermediaries such as installation agents, security trustees, arrangers, rating agencies, etc.

Ashwini Bhatia, Managing Director of SBI, noted that the conceptualization and operationalization of SLMA within a limited timeframe is an appropriate response to the long-felt need for broader participation in the lending market, aided by appropriate mitigation. risks. It will provide banks and other participants with a window to manage their loan asset portfolio, he added.

Bhatia pointed out that currently the primary and secondary markets are limited to banks and non-bank finance companies and domestic and foreign investors only participate in distressed debt through asset reconstruction companies.

“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, standardization of documents, active stakeholder participation and a mechanism effective price discovery.

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

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Priscilla C. Carnegie