- SLMA, which is a self-regulatory body, was formed on the recommendation of the Reserve Bank of India’s (RBI) Task Force on the Development of Secondary Market for Corporate Loans.
- SLMA’s website and logo were digitally launched by Saurav Sinha, Executive Director, RBI.
- Members of the SLMA-The top 10 banks: State Bank of India (SBI), ICICI Bank, Canara Bank, Standard Chartered Bank, Kotak Mahindra Bank, Deutsche Bank, Bank of Baroda, Punjab National Bank, Axis Bank, and HDFC Bank.
Features of SLMA:
i.The current SLMA will benefit banks in the form of capital optimisation, liquidity management and risk management under the secondary market.
ii.For borrowers, the benefits would be lower cost of capital, greater credit availability, and developing new relationships with banks and non-banks.
iii.The online system of the SLMA will facilitate the standardisation and simplification of primary loan documentation, and other trading mechanisms for the secondary loan market.
iv.It will promote standard trading, settlement and valuation procedures and practices. It will also set rules and timelines for the members for conducting the business and fix transaction-related charges.
Secondary Market Participation:
i.Current Scenario: Currently, Banks and Non-Banking Finance Companies (NBFCs) are the only participants in the primary and secondary loan market. Additionally, domestic and foreign investors participate in distressed debt via Asset Reconstruction Companies (ARCs).
ii.Banks are participating in the secondary market through inter-bank transactions (i.e. by transferring loan accounts from one bank to another) and by the sale of stressed assets to ARCs.
Recent Related News:
State Bank of India(SBI) topped the Ministry of Electronics & Information Technology(MeitY) Digital Payment Scorecard for 3 consecutive months. The scorecard tracks the performance of the commercial banks on various digital parameters.
About Primary and Secondary market:
i.Primary Market: It is a financial market, in which the new stocks and bonds are sold to the public for the 1st time through different types of issues like IPO (Initial Public Offer).
- Under the primary market, the investors could purchase securities directly from the issuer.
ii.Secondary Market: It is the market that contains the previously issued financial instruments such as stocks, Equity shares, bonds, preference shares, treasury bills, debentures, etc. from the primary market.
- The financial instruments in the secondary market would be traded by market participants.
