HDFC Bank and ICICI Bank- two of the country’s largest private banks – have jointly floated a company to promote the residential mortgage-backed securities market.
The two private banks have acquired a 7% stake each in a newly formed company – RMBS Development Company Limited (RDCL), said a stock exchange notice issued by them separately late Friday evening.
The banks have also stated that the newly formed company will have ten banks and financial institutions as its shareholders. They have not named other shareholders of the proposed company.
Residential mortgage-backed securities (RMBS) are a pool of home loan portfolios backed by the principal and interest paid by individual borrowers. Lenders often bundle the retail home loans into a pool and down-sell them as pass-through certificates (PTC).
HDFC Bank stated that the primary objective of RDCL is to promote and develop the residential-mortgage-backed security market by investing in them, facilitating investment, issuance, and trade of RMBS, extending credit enhancement (including second loss credit enhancement) for RMBS transactions, and providing liquidity support in the secondary market for RMBS transactions.
Both banks have invested Rs 35 crore each in the newly formed company, which is expected to be operational by the end of March.
