India
Answer ... One of the key issues relating to asset-based loans in India concerned title verification of land. Land falls under the jurisdiction of the states in India and land records are maintained in local and regional languages. The format of these records is also very local and varies even within a state. To resolve this issue, the government of India launched the Digital India Land Records Modernisation Programme; as of March 2022, approximately 93% of government land records in India had been digitised. The insurance regulator now also allows general insurance companies in India to offer title insurance to mitigate the risk of title disputes in secured finance.
Reserve Bank of India (RBI) has also issued a framework for the securitisation of standard assets and for the sale of loan exposure. These guidelines are aligned with the Basel framework and with working papers released by the Bank of International Settlement and are thus aligned with international best practices in other jurisdictions.
In a progressive move, the central regulatory body RBI has been planning to allow peer-to-peer platforms to enter the secured lending landscape with the intention of diversifying risks emanating from having a completely unsecured book with relatively new-to-credit customers which have been outside the reach of legacy credit vendors.
The finance sector in India is becoming more tech-inclusive every day. The digitalisation of the banking sector is ubiquitous, suggesting that future legislative reforms will most likely be based on secure lending effected through technology. RBI recently released a concept note on central bank digital currency and it will be interesting to watch whether it becomes a security backing loan in India. In the meantime, in September 2022, RBI released Guidelines on Digital Lending which aims to protect the data of borrowers using digital lending applications against misuse. These guidelines will have a significant impact on supply chain finance and factoring in India.
We foresee a boom in secured lending for infrastructure and construction as the world heads into a global recession, as India is predicted to remain largely unaffected by this trend. Additionally, overall infrastructure capital expenditure is estimated to grow at a compound annual growth rate of 11.4% from FY21 to FY26, driven by spending on water supply, transport and urban infrastructure.
India is currently the seventh largest civil aviation market in the world and is expected to become the third-largest civil aviation market within the next 10 years. Further, India has committed to a goal of 500 gigawatts (GW) of renewable energy capacity by 2030 (this currently stands at 150 GW). In light of this, we foresee increasing supplier-based international asset finance, aided by India’s liberalised exchange control policies.
India is also promoting the capitalisation and restructuring of stressed assets and doubtful debt. RBI is in the process of revamping the framework for asset reconstruction companies, which are now also allowed to acquire assets during insolvency proceedings. Hence, we foresee an increase in the number of such companies and more takers for third-party funding of dispute resolution.