CURRENT AFFAIRS
CURRENT AFFAIRS
Description
In a landmark move for India's financial ecosystem, the country witnessed the listing of its first-ever Mortgage-Backed Pass Through Certificates (PTCs) on the National Stock Exchange (NSE). This pioneering financial instrument has been structured by RMBS Development Company Ltd., with backing from housing loans originated by LIC Housing Finance Ltd.
This Development Matters
The initiative was spearheaded by the Department of Financial Services (DFS) under the Ministry of Finance, and marks a significant advancement in the securitization and housing finance segments. The listing of these PTCs supports the government's broader agenda of strengthening the housing finance market and improving the depth of India’s debt markets. The Rupees 1,000 crore issue was fully subscribed, reflecting strong investor confidence.
Key Features Of Mortgage-Backed PTCs
Issuer: RMBS Development Company Ltd.
Backed By: Home loans provided by LIC Housing Finance Ltd.
Total Issue Size: Rupees 1,000 crores
Number of Certificates: 1,00,000 units (Face value Rupees 1,00,000 each)
Coupon Rate: 7.26% annually
Maturity Period: Approximately 20 years
Listed On: National Stock Exchange (NSE)
Form: Dematerialized (demat), transferable
Credit Ratings: AAA(SO) by CRISIL and CARE Ratings
Coupon Discovery Platform: NSE’s Electronic Book Provider (EBP)
Tradability: PTCs are tradeable in the secondary market, adding liquidity
Understanding Pass Through Certificates (PTCs)
A Pass Through Certificate is a form of securitized debt instrument where investors receive periodic payments comprising principal and interest from a pool of underlying loans. In this instance, the underlying assets are residential mortgages, classifying this issue as a Residential Mortgage-Backed Security (RMBS).
Purpose And Strategic Significance
The launch of these PTCs holds multifaceted benefits:
Enhanced Liquidity - Facilitates greater cash flow in the housing loan sector.
Investment Opportunities - Offers long-duration, asset-backed options to investors.
Market Integration - Aligns the housing finance segment with broader debt markets.
Capital Mobilization - Enables housing finance companies to recycle capital into new loans.
Financial Inclusion - Supports securitization of smaller retail home loans to reach wider demographics.
Remarks By Department Of Financial Services
The DFS Secretary emphasized the critical role of housing finance in promoting economic development, citing its impact on infrastructure and allied industries. The securitization model via RMBS, he noted, can significantly broaden the housing finance market. The secretary also called for further innovation to improve capital mobilization for the housing sector and achieve the government’s affordable housing targets.
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