The Secondary Loan Market Association’s loan trading platform has seen inter-bank bilateral transactions of loan accounts aggregating about ₹6,000 crore since inception in August 2021.

Sunil Mehta, Chief Executive, Indian Banks’ Association, observed that inter-bank bilateral transactions of loans helps banks that have hit sectoral exposure limits create headroom through sale of loans.

Once headroom is created, banks can take fresh exposure in sectors where they had earlier reached exposure limits. It helps banks in rebalancing their sectoral exposure.

The sale of loans on SLMA’s loan trading platform is gradually picking up, Mehta said on the sidelines of ASSOCHAM’s national summit on stressed assets.

At the time of launch of SLMA’s website and logo in 2020, Mehta noted that one of the key success factors for the development of syndicated loan market in India will be the parallel development of secondary market for sale of loan.

SLMA is a self-regulatory body formed as per directions of the Reserve Bank of India with the primary objective to promote the growth of the secondary market for corporate loans.

An association representing the interests of institutions involved in the secondary market for loans in India, SLMA was incorporated in August 2020 by ten major public, private and foreign banks in accordance with the recommendation of the RBI’s task force formed for the development of secondary market for corporate loans.

The task force observed that an active secondary market will deliver significant benefits to banks, borrowers and other market participants.

For banks, the principal benefits would be capital optimisation, liquidity management and risk management. This would, in turn, lead to additional credit creation at the economy wide level.

For borrowers, the principal benefits would inter alia be lower cost of capital, greater credit availability, and developing new relationships with bank and non-bank providers of capital.

“The development of a secondary loan market will also enable enhanced return opportunities for smaller banks, NBFCs, insurance companies, pension funds and hedge funds. Also, an active secondary market for corporate loans may result in a productive and optimal deployment of capital by banks which will have a consequential positive impact from a fiscal perspective for the government,” the report said.