RBI Asked to link MHP to Asset, Class, Tenor of loan

In response to the draft guidelines on securitisation issued by the RBI in April 2010, banks and non-banking finance companies recently requested RBI for the minimum holding period (period between origination of a loan and its securitisation) to be linked to the asset class and the tenor of the loan. As per the RBI regulations, the minimum holding period (MHP) for loans with less than two years maturity should be nine months whereas the mhp for loans of over two years should be 12 months. The RBI proposed minimum retention requirement (MRR) at 5 per cent for loans of less than two year maturity and at 10 per cent for loans of over two year maturity. Banks and NBFCs also demanded a balance between MRR and MHP, as the stringent requirements would likely dampen lending in areas such as the microfinance sector.