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RBI in talks with IBA to boost banks participation on SLMA platform

January 03, 2023

RBI in talks with IBA to boost banks participation on SLMA platform
The Reserve Bank of India (RBI) is in talks with lenders to deepen the secondary loan market in the country, especially with regard to the inter-bank transfer of corporate loan accounts, banking sources told FE.

The regulator has held talks with the Indian Banks’ Association (IBA) to boost the participation of lenders in the platform created by the Secondary Loan Market Association (SLMA) for this purpose, said a senior banker. A vibrant secondary corporate loan market can potentially help banks exit toxic assets quickly, bankers said.

The SLMA is a self-regulatory body, formed by major banks both public and private following the recommendations of an RBI panel under former Canara Bank chairman TN Manoharan to promote the development of the secondary market for corporate loans.

The renewed focus on such a market for corporate loans assumes importance, as inter-bank bilateral transactions of loan accounts have been relatively infrequent, even though lenders have been transferring a significant amount of their stressed loan portfolio to asset reconstruction companies (ARCs) in recent years. Moreover, the country’s securitization market has mostly evolved in the retail segment and there has been no major break-through in the corporate loan segment.

The IBA has now decided to encourage its member-banks to participate vigorously in the secondary market through the SLMA platform, and facilitate meetings between lenders and the SLMA executives for this purpose, said a banker.

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