Two tracks, five engagement models, one governance frame.
Track A gives the bad bank an exit it cannot offer itself: near-par settlement with the borrower retained. Track B gives HFC, PSU and diaspora books the hedge a single borrower cannot buy. Both run under a perimeter agreed with Indian authorities and supervised at the hub by the DFSA.
NPA settlement and co-ownership: the exit the bad bank cannot offer.
Loan tape
PSB / ARC / NARCL shares property-backed accounts under NDA; screen for value ≥ ~3× balance, rental evidence, clean or clearable title
Mandate
Borrower mandates MPCL: whole property is the base; MPCL may deduct from rent; irrevocable terminal-event sale instruction
Settlement
MPCL pays the lender at par or negotiated discount from programme capital via the GIFT feeder; account closed, charge released
Charge & hold
Registered mortgage / CERSAI charge in favour of the programme; contractual hold until MPCL clearance; co-ownership off-title
Recovery
Five years, no instalments, no accrual; borrower keeps rent; deduction only on need; weekly reporting to the sponsor
Exit
Refinance with a performing lender, sale at market or programme rollover; terminal-event sale only as last resort
| Outcome for a ₹2 Cr property-backed NPA | Sale to ARC / NARCL | SARFAESI enforcement / OTS | MPCL co-ownership settlement |
|---|---|---|---|
| Bank receives | ~30% — 15% cash, rest in security receipts | Auction proceeds after 12–36 months, typically at a discount | Par or negotiated discount in cash at settlement |
| Borrower outcome | Faces a distressed-debt buyer; asset usually lost | Loses asset and the equity above the balance | Keeps title and rent; five-year recovery clock |
| Government exposure | SR guarantee (NARCL) — contingent liability | None direct; social and tax-base cost | None; weekly audited results |
| Timeline to closure | 3–8 years | 1–3 years | Settled day one; five-year recovery |
| Party | Gain |
|---|---|
| PSU bank | Cash at near par instead of 15% cash + 85% security receipts; provision and capital release; no NCLT |
| NARCL / ARC | A performing counterparty for property-backed SR pools; guarantee never triggered |
| Borrower | Keeps title and rent; five years without instalment pressure; no SARFAESI |
| Government of India | No SR-guarantee call; tax base retained; eviction avoided; weekly audited results |
| AIF / programme investor | Registry-protected co-ownership at a ~3× cushion, serviced by rental, terminal-event floor |
Eligibility discipline
- Property-backed only — residential, commercial, small industrial.
- Registered lease deed or municipal rental benchmark per file; never a blanket yield.
- Value-cushion test at entry; title clean or clearable; state stamp-duty regime mapped.
- Accounts in SMA-2 to NPA-D1 preferred: early enough to retain the borrower, late enough for the bank to want out.
Sleeping Period EMI India as policy
For the performing-but-stressed cohort — PMAY-linked and HFC borrowers heading for NPA as moratoria roll off — the framework pauses the instalment for a defined sleeping period, extendable, no forced sale, no out-of-pocket cost, while released equity services the lender. Presented to RBI and NHB as a standing authorised framework: a policy, not a thousand restructurings.
Sparring note for a PSB board
"We already sell to NARCL." Yes — at 15% cash, 85% guaranteed paper, and a courtroom timeline. A near-par cash settlement with the borrower retained is worth more to the bank, the borrower and the guarantor. The only party it is worth less to is the distressed-debt buyer.
Pooled rupee hedging: fixed instalments for HFC, PSU and diaspora books.
Indian banks hedge their own books industrially and pass rate-reset and currency risk straight through to borrowers who cannot enter an ISDA. Track B aggregates that risk into blocks a DIFC treasury prices off its own curve, with the onshore leg supervised by IFSCA and the RBI.
| Pool candidate | Benchmark | Typical tenor | Block size | Pass-through | Onshore leg |
|---|---|---|---|---|---|
| HFC affordable-housing book | MCLR / EBLR (repo-linked) | 10–20 years, amortising | ₹500–2,000 Cr | Fixed rupee instalment for life of loan | IFSCA unit ↔ AD bank; HFC executes to borrower |
| PSU / DISCOM project debt | MCLR or USD SOFR | 7–15 years | ₹1,000–4,000 Cr | Fixed rate or capped USD-INR | PSU treasury via AD bank |
| NRI diaspora mortgages (UAE) | EIBOR (AED) vs INR income | 15–25 years | AED 100–500M | Capped INR-equivalent instalment | Partner bank in the UAE; LRS / FEMA via AD bank |
| Mid-size corporate ECBs | SOFR / term USD | 3–7 years | USD 50–300M | Fixed INR servicing cost | IFSCA unit; RBI ECB hedging norms |
| Hedge economics | Individual | Pooled via corridor |
|---|---|---|
| ISDA / CSA access | None | MPCL faces the DIFC desk; IFSCA unit onshore |
| Ticket | Sub-institutional | ₹500–4,000 Cr notional blocks |
| Pricing | Retail margin or unavailable | Bank curve + disclosed spread |
| Basis / prepayment | Borne by borrower | Monitored, rebalanced weekly |
| Fiscal cost | Interest subvention if any | Nil — inside the fixed instalment |
What Track B does not do
- It does not guarantee coupons or capital — hedges are collateralised swaps with a bank counterparty and carry that counterparty's credit and the pool's basis risk.
- It does not speculate — every position mirrors an underlying liability, rebalanced weekly against pool drift and prepayment.
- It does not face retail — pass-through to individual borrowers is executed by the Indian bank or HFC inside its own customer relationship and FEMA compliance.
- It does not replace RBI reserves policy — it removes individual positions from the queue that would otherwise need defending.
HFCs & NHB refinance
Affordable-housing books resetting on MCLR / EBLR. A pooled swap fixes the instalment for the life of the loan without the HFC taking basis risk; NHB refinance lines become rate-stable.
Infrastructure PSUs & DISCOMs
Floating-rate and dollar-denominated project debt against rupee revenue. Pooled IRS and CCS through the corridor; sovereign-adjacent credit at institutional pricing.
NRI & diaspora books
Rupee-income owners of dirham mortgages, dirham-income owners of rupee assets, NRE-funded property. INR–AED–USD pooled hedge; capped-rate pass-through via the partner bank.
Corporate ECBs
The unhedged share of external commercial borrowings the RBI flags each year. Pooled CCS blocks for mid-size borrowers who cannot economically hedge alone.
Regulatory routing
Track B is structured for treasury, market-risk and derivatives desks and documented under ISDA 2002 Master Agreement with Credit Support Annex; SA-CCR and CVA / XVA priced at institutional scale; deliberately kept out of credit-committee channels. Onshore: an IFSCA-regulated unit at GIFT City (where offshore INR derivatives are permitted) facing an RBI-authorised dealer for INR settlement and pass-through. Rails: RBI–CBUAE local-currency settlement framework; India–UAE CEPA. Every pool is visible to the RBI through the AD bank and to IFSCA through the unit.
The UAE model, mapped to Indian law.
To be confirmed by Indian counsel state by state before launch.
| Element | UAE model | India mapping |
|---|---|---|
| Registry hold | DLD mandate hold | Registered mortgage at sub-registrar + CERSAI charge; hold by contractual undertaking; SARFAESI interaction mapped |
| Co-ownership | Off-title contract | Contractual co-ownership / participation agreement; stamp-duty treatment by state |
| Rental evidence | Ejari / RERA index | Registered leave-and-licence or lease deed; municipal rental benchmarks |
| Instrument custody | DIFC Client Wealth Account | GIFT City feeder account; FEMA / LRS routing for individuals |
| Hedge execution | ISDA/CSA at UAE treasury | IFSCA unit ↔ RBI AD bank; offshore INR derivatives at GIFT |
Design principles that survive Indian due diligence
- Settlement, not evergreening. The bank receives cash and closes the account; no fresh credit to an NPA borrower; no regulatory-forbearance dependence.
- Third-party capital. Never the selling bank's own funds; AIF, sovereign or institutional money through the GIFT feeder.
- Fair value. Structured instruments are FVTPL under Ind AS 109 / IFRS 9 — designed on that basis.
- Title stays with the borrower. Co-ownership is contractual; no transfer, no stamp-duty event on the property itself.
- Wholesale only. MPCL faces institutions; any retail pass-through is the Indian bank's or HFC's own customer plumbing.
Five ways Indian institutions work with the corridor.
Different layers for different sponsors — a framework authorised, a portfolio resolved, a hedge for the state's own books. Adopt one or sequence several. In every model the Indian counterparty provides authorisation and nomination; capital is optional and follows evidence.
| Model | Indian counterparty provides | MPCL provides | Best first mover |
|---|---|---|---|
| 1 · Corridor framework authorisation | DPIIT / DEA corridor MoU; RBI and IFSCA agree a programme perimeter recognising co-ownership settlement and pooled hedging as permitted mechanisms for supervised institutions | Full documentation set, product rules, control regime, reporting template and audit trail; DFSA supervision as hub anchor; training for the onshore supervisor | DPIIT · DEA · RBI · IFSCA |
| 2 · Nominated-portfolio settlement | A PSB, NARCL / IDRCL or ARC nominates a property-backed classified book under NDA; release-on-settlement protocol; charge and hold cooperation | Screening, borrower mandates, settlement funding through the GIFT feeder, co-ownership contracting, five-year servicing, weekly audited results | PSB remedial vertical · NARCL · large ARC |
| 3 · Anchored programme vehicle | Anchor capital (debt or partial equity) from NIIF, EXIM, SIDBI or a state-backed fund into the AIF feeder / DIFC vehicle, or a guarantee that crowds in institutional and diaspora capital | Vehicle structuring, published audited NAV, 60–80% portfolio-backed release, mark-to-market and stop-loss controls, insurance wrap | NIIF · EXIM Bank · SIDBI · state funds |
| 4 · Hedging utility | Nomination of HFC, PSU, DISCOM, municipal or diaspora pools; AD-bank access; benchmark and settlement conventions | Pool aggregation, notional sizing, ISDA/CSA execution at a DIFC treasury, fixed-instalment or capped-rate pass-through, weekly basis monitoring | NHB · HFCs · infrastructure PSUs · AD banks |
| 5 · Housing-affordability policy tool | Adoption of Sleeping Period EMI India as a standing relief framework for a defined cohort — PMAY-linked, moratorium-sunset, disaster-affected regions | Eligibility engine, scenario builder, priority-of-payments rules, bank / HFC integration, published outcomes | MoHUA · NHB · RBI |
Asked first
- A named sponsor and a named portfolio or pool.
- A programme perimeter — not a market-wide rule change.
- Cooperation on charge / hold mechanics and the GIFT feeder.
- Weekly audited results published to the sponsor, RBI and IFSCA.
Not asked
- No budget line, no guarantee call, no interest subvention.
- No retail-facing role for any Indian public body.
- No exclusivity beyond the nominated programme.
- No capital before evidence — anchor capital is a Model-3 choice.
Merit-based decision test
(1) Does it settle the bank without new credit to an NPA borrower? (2) Does it keep the borrower in the asset with title? (3) Is the capital third-party and the accounting fair-value? (4) Are the results auditable weekly onshore? If all four are yes, the residual objections are about novelty — and novelty is what a programme perimeter is for.
Who supervises this, what happens when the market moves, and what the Centre saves.
Three lines of defence
- 1st line — Structuring & Servicing: per-file eligibility, rental evidence, value cushion, mandate execution.
- 2nd line — Risk & Compliance: mark-to-market (10% stop-loss), basis and prepayment monitoring, AML / sanctions, DFSA and IFSCA reporting.
- 3rd line — Independent assurance: statutory audit, independent valuation, transaction advisory, weekly published results.
Regulatory perimeter — both ends
- Hub: DFSA Category 3C · License #7741 · Holding or Controlling Client Assets; Professional Clients and public-sector counterparties only; products defined in the DFSA-approved Regulatory Business Model.
- Onshore: IFSCA unit and / or SEBI AIF feeder; RBI-authorised dealer for INR legs; FEMA / LRS compliance via the partner bank; DPIIT / DEA corridor MoU as the umbrella.
- AML / CTF, sanctions (UN, OFAC, UAE, Indian lists), KYC / EDD, complaints handling, board risk committee; MLRO and Compliance Officer in place.
Accounting and prudential treatment
- Ind AS 109 / IFRS 9: structured instruments with embedded calls and barriers fail SPPI → FVTPL for every holder. Designed on that basis.
- Basel III SA / RBI standardised approach for real-estate exposures; CRE22 collateral haircuts mapped; SA-CCR and CVA / XVA for Track B swaps.
- Priority of payments: coupon-first, springing-rental-second. Any intra-group IP royalty arm's-length, auditor-set, disclosed.
| Touchpoint | Indian authority | Hub authority | What each sees |
|---|---|---|---|
| Programme perimeter | DPIIT / DEA (corridor MoU) · RBI · IFSCA | DFSA | Product rules, control regime, reporting template, audit trail |
| Settlement & charge | Sub-registrar · CERSAI · SARFAESI framework | — | Mandate, charge, hold, co-ownership contract |
| Hedging | RBI (AD bank, ECB norms) · IFSCA | CBUAE (bank counterparties) | Pool notional, swap terms, collateral, weekly basis |
Rows: likelihood ↑ · colour = residual severity after mitigant.
| Per ₹1,000 Cr of Track A settlement capital | Illustrative |
|---|---|
| Accounts settled at ₹2 Cr average | ~500 |
| Bank provisions released (50% coverage) | ~₹500 Cr |
| Risk-weighted capacity freed (100% RW) | ~₹1,000 Cr |
| Collateral value retained (~3× cushion) | ~₹3,000 Cr |
| SR-guarantee calls avoided (~70% discount) | up to ~₹700 Cr |
| Households / MSMEs kept in asset | ~500 |
Per ₹2,000 Cr pooled notional (Track B): 1,000–5,000 loans; rate certainty for life of loan; a 150 bps move changes no instalment; fiscal cost nil. No forward return is stated for any vehicle.
| Metric | Five-year target | National effect |
|---|---|---|
| Throughput | ₹4 lakh crore (USD 45 bn) | ≈ 1.1% of FY2026 nominal GDP brought into productive use |
| Jobs | 1 million (350k direct) | Inclusive growth and skill uplift |
| Offshore inflows | USD 11–12 bn (2–2.5 bn p.a.) | External-balance strength, fully hedged |
| Fiscal dividend | ₹35,000 crore (USD 4.0 bn) | Budget-neutral revenue gain |
| Banking participation | ₹2 lakh crore of origination | Liquidity neutrality; no inflationary effect |
Evidence first, then scale — and an exploratory session to start.
DPIIT / DEA follow-up; RBI / IFSCA perimeter; AIF feeder term sheet; Indian legal mapping state by state.
First PSB / ARC book and HFC or PSU pool screened under NDA; hub programme vehicle structured.
Weekly results to DPIIT / RBI / IFSCA; audited NAV; first pooled swap line; Sleeping Period™ framework to RBI / NHB.
Multiple feeders and PSB programmes; standing hedge lines; ₹1.23 lakh crore deployed and ₹4 lakh crore cumulative throughput by 2031; playbook replicated on the same hub.
| Requested next step | Action | Window |
|---|---|---|
| DPIIT nomination | Joint DPIIT–DEA–RBI–IFSCA–DFSA task force to agree a programme perimeter under the CEPA financial-services track | 90 days |
| RBI / NHB template | Standardised ≤ 80% LTV settlement-refinance template, valuation protocol and reporting | Within perimeter |
| Banking participation | PSBs, HFCs and NBFCs nominate property-backed stressed books under NDA; ₹2 lakh crore of origination over five years | From Phase 1 |
| Phase 1 programme | ₹100 crore proof-of-concept portfolio, co-supervised, quarterly report to NITI Aayog | 2026–27 |
| FX channel | DFSA-supervised credit-enhancement lines under the FEMA / ECB automatic route and the RBI–CBUAE local-currency framework | With perimeter |
Next step: a forty-five-minute exploratory session under NDA.
With the sponsor's technical team — DPIIT / DEA, RBI / IFSCA, a PSB remedial vertical or NARCL — then nomination of one portfolio or pool and a private assessment through MPCL's scenario engine.
Money Protects Capital Limited · DIFC, Dubai · +971 4 333 0181 · [email protected]