Loan Market: The secondary loan market will go live with Rs 1000 cr offers by Axis
The Secondary Loan Market Association (SLMA) has developed a marketplace where institutions can buy or sell business loans with a level of standardization, which should result in better price discovery and help borrowers reduce costs on a period. A group of 10 banks including State Bank of India,
and formed the association.
To start with, Axis Bank executed three project finance deals of nearly ₹1,000 crore using standardized SLMA compliant documentation that makes them eligible for listing and trading on the platform.
The private sector lender will set up these loans on the platform, as it intends to sell them in whole or in part. The transactions will likely take place this month, marking a new chapter in India’s secondary lending market. Axis is in discussions with other lenders to initiate the sale of these loans.
“This whole process will mature India’s corporate lending market, which is lacking unlike developed economies,” said Neeraj Gambhir, group director and head of treasury at Axis Bank. “We executed these bespoke trades in the primary market as a prelude to secondary trading on the SLMA platform.”
Loans granted by Axis Bank are long-term, ranging up to 15 years.
Two years ago, the idea of SLMA was mooted under the aegis of the Reserve Bank of India. It was presented as a self-regulatory body formed by 10 member banks. , , and are also part of the group, together with two foreign banks – Standard Chartered Bank and Deutsche Bank.
This decision accelerated during the pandemic, when the authorities felt the need for a dynamic credit market which must be easily accessible to all. “Axis Bank was appointed by the core group of 10 banks to lead the sub-committee to draft the standard documents, which would facilitate the negotiation of loans,” Gambhir said.
While the trading website was ready last year, the banks officially launched the platform only a few weeks ago. SLMA currently operates from the Mumbai office of the Association of Indian Banks (IBA).
Cyril Amarcand Mangaldas has been appointed legal counsel for the drafting of standard loan documents under the SLMA. Wadia Ghandy & Co acted as counsel for the project review.
After more than nine months of deliberations with the 10 member banks and legal counsel, the final draft of the term loan funding documents has been submitted to SLMA. It was then shared with the IBA for dissemination to all banks for adoption.
On the global stage, the Asia Pacific Loan Market Association (APLMA) promotes growth and liquidity in the primary and secondary loan markets of the Asia-Pacific region. The APLMA India Chair is currently held by a representative of Axis Bank.