In the first step towards building a secondary loan market in India, 10 banks including State Bank of India (SBI) and ICICI Bank came together last week to set up the Secondary Loan Market Association (SLMA), where lenders will trade corporate loans. Apart from SBI and ICICI Bank, it includes Canara Bank, Standard Chartered Bank, Kotak Mahindra Bank, Deutsche Bank, Bank of Baroda, Punjab National Bank, Axis Bank and HDFC Bank. It will build an online system for the standardization and simplification of primary loan documentation, and standardization of the purchase and sale/assignment documentation and other trading mechanisms for the secondary loan market. In case of potentially stressed borrowers, the secondary market helps banks reduce the overall recovery cost as the lenders can go for an immediate realization of value even before a default. The secondary market helps larger borrowers widen their lender base, avoiding funding uncertainties associated with having banking relationships with a few lenders.

Source: Mint August 17, 2021 17:48 UTC