1. Every Securitisation Company or Reconstruction Company shall maintain, on an ongoing basis, a capital adequacy ratio, which shall not be less than fifteen percent of its total risk weighted assets. The risk-weighted assets shall be calculated as the weighted aggregate of on balance sheet and off balance sheet items as detailed hereunder:

   Weighted Risk Assets
   On-Balance Sheet items	Percentage risk weight
   a) Cash and deposits with scheduled commercial banks	0
   b) Investments in Government securities	0
   c) Other assets	100
   Off- Balance Sheet Items
   All Contingent Liabilities	50

2. Shares held in other Securitisation Companies or Reconstruction Companies shall not attract any risk weight.

1. A Securitisation Company or Reconstruction Company, may as a sponsor and for the purpose of establishing a joint venture, invest in the equity share capital of a Securitisation Company or Reconstruction Company formed for the purpose of asset reconstruction;

2. Securitisation Company or Reconstruction Company may deploy any surplus available with it only in Government securities and deposits with scheduled commercial banks in terms of a policy framed in this regard by its Board of Directors;

3. No Securitisation Company or Reconstruction Company shall invest out of its owned fund in land and building, provided that this restriction will not apply to funds borrowed as also to owned fund in excess of the minimum prescribed.

Every Securitisation Company or Reconstruction Company shall prepare its balance sheet and profit and loss account as on March 31 every year.

1. Classification

   1. Every Securitisation Company or Reconstruction Company shall, after taking into account the degree of well-defined credit weaknesses and extent of dependence on collateral security for realisation, classify the assets into the following categories, namely:

      1. Standard assets<

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      2. Non-Performing Assets.

   2. The Non-Performing Assets shall be classified further as

      1. `Sub-standard asset' for a period not exceeding twelve months from the date it was classified as non-performing asset;

      2. `Doubtful asset' if the asset remains a substandard asset for a period exceeding twelve months;

      3. `Loss asset' if the asset is non-performing for a period exceeding 36 months or if the asset is adversely affected by a potential threat of non-recoverability due to either erosion in the value of security or non-availability of security or if it has been identified as loss asset by the Securitisation Company or Reconstruction Company or its internal or external auditor.

   3. Assets acquired by the Securitisation Company or Reconstruction Company for the purpose of asset reconstruction may be treated as standard assets during the planning period, if any.

2. Asset Reconstruction : Renegotiated / Rescheduled assets

   1. Where the terms of agreement regarding interest and /or principal relating to standard asset have been renegotiated or rescheduled by a Securitisation Company or Reconstruction Company (other wise than during planning period) the asset concerned shall be classified as substandard asset with effect from the date of renegotiation / reschedulement or continue to remain as a doubtful asset as the case be.

   2. The asset may be upgraded as a standard asset only after satisfactory performance for a period of twelve months as per the renegotiated / rescheduled terms.

3. Provisioning requirements

   Every Securitisation Company or Reconstruction Company shall make provision against Non Performing Assets, as under: -

   Asset Category	Provision Required
   Substandard Assets	A general provision of 10% of the outstanding; Doubtful Assets
   Doubtful Assets	100% provision to the extent the asset is not covered by the estimated realisable value of security; In addition to item (i) above, 50% of the remaining outstanding.
   Loss Assets	The entire asset shall be written off. (If, for any reason, the asset is retained in the books, 100% thereof shall be provided for).

All investments should be valued at lower of cost or realisable value. Where market rates are available, the market value would be presumed to be the realisable value and in cases where market rates are not available, the realisable value should be the fair value. However, investments in other registered Securitisation Company or Reconstruction Company shall be treated as long term investments and valued in accordance with the Accounting Standards and guidance notes issued by the Institute of Chartered Accountants of India.

The income recognition shall be based on recognised accounting principles;

All the Accounting Standards and Guidance Notes issued by the Institute of Chartered Accountants of India shall be followed in so far as they are not inconsistent with the guidelines and directions contained herein;

Interest and any other charges in respect of all the NPAs shall be recognised only when they are actually realised. Any such unrealised income recognised by a Securitisation Company or Reconstruction Company before the asset became non-performing and remaining unrealised shall be derecognised.

1. (1) Every Securitisation Company or Reconstruction Company shall, in addition to the requirements of schedule VI of the Companies Act, 1956, prepare the following schedules and annex them to its balance sheet:

   1. the names and addresses of the banks/financial institutions from whom financial assets were acquired and the value at which such assets were acquired from each such bank/financial institutions;

   2. Dispersion of various financial assets industry-wise and sponsor-wise. (dispersion is to be indicated as a percentage to the total assets);

   3. Details of related parties as per Accounting Standard and guidance notes issued by the Institute of Chartered Accountants of India and the amounts due to and from them; and

   4. A statement clearly charting therein the migration of financial assets from standard to non-performing.

2.  

   1. The accounting policies adopted in preparation and presentation of the financial statements shall be in conformity with the applicable prudential norms prescribed by the Bank.

   2. Where any of the accounting policies is not in conformity with these directions, the particulars of departures shall be disclosed together with the reasons therefor and the financial impact on account thereof.

   3. Where such an effect is not ascertainable, the fact shall be so disclosed citing the reasons therefore.

   4. An inappropriate treatment of an item in Balance Sheet or Profit and Loss Account cannot be deemed to have been rectified either by disclosure of accounting policies used or by disclosure in notes to balance sheet and profit and loss account.

Every Securitisation Company or Reconstruction Company shall put in place an effective Internal Control System providing for periodical checks and review of the asset acquisition procedures and asset reconstruction measures

The Bank may, if it considers it necessary for avoiding any hardship to Securitisation Company or Reconstruction Company, or for any other just and sufficient reason exempt all Securitisation Companies or Reconstruction Companies or a particular Securitisation Company or Reconstruction Company or class of Securitisation Companies or Reconstruction Companies, from all or any of the provisions of these guidelines and directions either generally or for any specified period, subject to such conditions as the Bank may impose.

1. Disclosure in Offer Document

   1. Relating to the Issuer of Security Receipts

      • Name, place of Registered Office, date of incorporation, date of commencement of business of the Securitisation Company or Reconstruction Company;

      • Particulars of sponsors, shareholders, and a brief profile of the Directors on the Board of the Securitisation Company or Reconstruction Company with their qualifications and experience;

      • Summary of financial information of the company for the last three years or since commencement of business of the company, which ever is shorter;

      • Details of Securitisation / Asset Reconstruction activities handled, if any, in the last three years or since commencement of business, which ever is shorter.

   2. Terms of Offer

      • Objects of offer;

      • Description of the instrument giving particulars relating to its form, denomination, issue price, etc together with an averment that the transferability of security receipts is restricted to the qualified institutional buyers ;

      • Arrangements made for management of assets and extent of management fee charged by Securitisation Company or Reconstruction Company;

      • Interest rate / probable yield;

      • Terms of payment of principal / interest, date of maturity / redemption;

      • Servicing and administration arrangement;

      • Details of credit rating, if any, and a summary of the rationale for the rating;

      • Description of assets being securitised,

      • Geographical distribution of asset pool;

      • Residual maturity, interest rates, outstanding principal of the asset pool;

      • Nature and value of underlying security, expected cash flows, their quantum and timing, credit enhancement measures;

      • Policy for acquisition of assets and valuation methodology adopted ;

      • Terms of acquisition of assets from banks /financial institutions;

      • Details of performance record with the Originators ;

      • Terms of replacement of assets, if any, to the asset pool;

      • Statement of risk factors, particularly relating to future cash

      • flows and steps taken to mitigate the same;

      • Arrangements, if any, for implementing asset reconstruction measures in case of default

      • Duties of the Trustee;

      • Specific asset reconstruction measures, if any, on which approvals will be sought from investors;

      • Dispute Redressal Mechanism.

2. Disclosure on quarterly basis

   • Defaults, prepayments, losses, if any, during the quarter; Change in credit rating, if any;

   • Change in profile of the assets by way of accretion to or realisation of assets from the existing pool;

   • Collection summary for the current and previous quarter;

   • Any other material information, which has a bearing on the earning prospects affecting the qualified institutional buyers;