What is a securitised debt instrument (SDI)?

What is a securitised debt instrument? A securitised debt instrument, or SDI, is a note issued by a trust against a pool of loans or receivables that a lender has sold into that trust. You are not lending to the company whose name is on the deal. You hold a claim on the cash that a bundle of underlying borrowers pays. In India these instruments are issued and listed under the SEBI (Issue and Listing of Securitised Debt Instruments and Security Receipts) Regulations, 2008, a rulebook substantially rewritten on 5 May 2025. This guide explains what an SDI is, who issues it, what can sit inside the pool, and what gets disclosed. It is not investment advice.

How does a securitised debt instrument work?

Three parties do the work.

The originator is the lender that made the underlying loans or holds the receivables. It sells that pool to a trust, which takes the assets off its own books and frees up capital to lend again.

The special purpose distinct entity, or SPDE, is that trust. It exists for this pool and no other purpose, and it is the entity that actually issues the securitised debt instrument. A trustee acts for the investors. Since the 2025 amendment, that trustee is registered under the SEBI (Debenture Trustees) Regulations, 1993 rather than under the SDI Regulations themselves, and the old registration chapter was omitted.

The investors buy the notes. Their return comes from the collections on the pool, routed through the trust in an order set by the transaction documents. Where a deal is tranched, senior notes are paid before junior ones, and the junior tranche absorbs losses first.

That structure is the whole point of the instrument, and it is also the whole risk of it. A securitised debt instrument's credit quality is the credit quality of a few thousand borrowers you will never see individually, described to you through a disclosure format.

What can be securitised in India?

Regulation 2(1)(g) lists the permitted underlyings. Broadly they are: any financial asset originated by an originator regulated by the Reserve Bank of India, equipment leasing receivables, listed debt securities, trade receivables arising from bills or invoices duly accepted by the obligors, rental receivables, and such debt or receivable, including sustainable securitised debt instruments, as the Board notifies. All of them must arise from written contractual obligations or written contracts, and the regulation states plainly that no other debt or receivable, including unlisted debt securities, is permitted as an underlying.

Two structures are banned outright: re-securitisation, meaning a securitisation whose underlying is itself a securitisation exposure, and synthetic securitisation, where credit risk is transferred by derivative rather than by selling the assets.

Where the originator is RBI-regulated, a further exclusion list applies. Revolving credit facilities such as credit card receivables and cash credit, restructured loans and advances in the specified period, exposures to other lending institutions, refinance exposures of All India Financial Institutions, loans with bullet payment of both principal and interest, and loans with residual maturity of less than 365 days may not be securitised. Two carve-outs sit inside that list: agricultural loans to individuals with tenor up to 24 months where both interest and principal fall due at maturity, and trade receivables with tenor up to 12 months discounted or purchased by lenders from their borrowers. Both carve-outs are conditional on the borrower or the drawee having fully repaid the last two loans or receivables within 90 days of the due date.

What conditions govern the pool itself?

Regulation 19A, inserted in May 2025, sets four:

• No concentration. No obligor may account for more than 25 percent of the asset pool at the time of issuance. The Board may relax this.
• Homogeneity. The assets in the pool must be homogeneous, defined in the regulation as having the same or a similar risk or return profile.
• Fully paid up upfront. Securitised debt instruments must be fully paid up at the outset.
• Track record. The originator, and the obligor, must have three financial years of operations that produced the type of debt or receivable being securitised. This condition does not apply where the originator is regulated by the RBI.

Two further rules keep the originator's own money in the deal: it must retain a slice of the pool under the minimum retention requirement, and it must have held the loans for a while before selling them under the minimum holding period.

Who can actually buy one?

Almost nobody retail. Regulation 30A sets the minimum ticket size for issuance at rupees one crore, where ticket size means the size of the investment by a single investor. Subsequent transfers carry the same one crore floor where the originator is not RBI-regulated. For an SDI whose underlying is listed securities, the transfer floor is the highest face value among those securities. Instruments with amortisation structures are allowed to trade at amortised value if the ticket size falls below one crore as the pool pays down.

That single number tells you who this market is for. It is an institutional and high-net-worth instrument by construction, not a retail one.

What does an SDI disclose after issue?

Two clocks run.

Privately, Regulation 10A requires the originator to give the trustee periodic reports on the performance of the underlying asset pool at least quarterly, plus a quarterly certificate from its auditors on the disclosures it has made about the pool.

Publicly, Regulation 11B requires the special purpose distinct entity and the trustee to furnish information to SEBI on a half-yearly basis. SEBI specified that format in a circular dated 16 December 2025, effective 31 March 2026: the trustee files prescribed disclosures with the Board and with the stock exchange where the SDIs are listed, within 30 days from the end of March or September. Two formats exist, one for pools backed by loans, listed debt securities or credit facilities, and one for pools backed by other exposures. Walking through the fields is the job of how to read an SDI disclosure, and the difference between the two formats is set out in SDI Annexure I vs Annexure II.

How is an SDI different from a bond?

A non-convertible debenture is a claim on one company. A securitised debt instrument is a claim on a pool of obligations that a company originated and then sold. The credit you are exposed to is different, the disclosures are different, and so is the minimum cheque. That comparison is worked through in securitised debt instrument vs NCD, and the rating scales that appear in each are explained in what is a credit rating.

A securitised debt instrument is, in the end, a disclosure product: the pool is invisible, so the prescribed format is the only window onto it. Flock reports public regulatory filings with every claim sourced and dated. What any of it means for your money is your call to make.