Banks to list securitised debt instruments on stock exchanges

New Delhi, May 17 (UNI) Parliament today approved a legislation that will help banks list securitised debt instruments on stock exchanges and raise more funds from the market.

The Securities Contracts (Regulation) Amendment Bill was passed through a voice vote in the Rajya Sabha, two days after the Lok Sabha did it.

At present, the securitisation of mortgages and bad loans of banks is allowed but such securities are not allowed to be traded on stock exchanges.

Securitisation involves pooling of financial assets such as home loans, car and personal loans, credit card dues, corporate debt and export receivables, with the assets' income streams used to generate interest payments.

Last year, the government had proposed changes in the law to develop a vibrant market for securitised assets.

Finance Minister Palaniappan Chidambaram said the amendment will allow banks to keep securitised loans off their balance sheets, reduce the need for additional capital, improve liquidity and improve access to alternate sources of funding.

''It will spread the risks and help create an active securities market. Such instruments are widely available in other countries for banks, financial institutions and retail investors.'' The Securities Contracts (Regulation) Amendment Bill 2007 replaced the Securities Contracts Regulation Act 1956. The bill also provided for vesting powers of regulation to the Securities and Exchange Board of India (SEBI).

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