A task force set up by India's central bank on Tuesday recommended a slew of measures for developing a secondary market for corporate loans, including easing of regulations to allow foreign portfolio investors (FPIs) to directly purchase distressed loans from banks.

These moves are aimed at developing India's credit markets and come at a time when the country is facing a liquidity crisis among its shadow banks after the collapse of IL&FS, one of the biggest shadow banks, last year.

FPIs, who so far were allowed to invest in stressed assets through asset reconstruction companies (ARCs), can directly participate in the bad loan market within an annual limit set by the Reserve Bank of India (RBI) in consultation with the government, the task force recommended.

RBI's task force also recommended easing rules around the securitisation of loan assets and permitting wider participation from funds and insurance companies in trading these securities, the central bank said.

It also proposed setting up a self-regulatory body to standardize loan documents and promote transparency in the secondary market.

RBI has posted the recommendations on its website for comments from stakeholders and they are subject to the central bank's approval.

The task force was formed in May to review the existing state of the market for loans in India and to make recommendations for the development of a secondary market for corporate loans. #casansaar (Source - RBI, PTI, MoneyControl)