Balancing Innovation And Regulation: A Study On Credit Risk Transfer Practices In Indian Financial Institutions

Author(s)	Mr. Joe Alwin S
Country	India
Abstract	Credit risk transfer (CRT) mechanisms have become central to the stability and resilience of India’s financial system. As the financial sector evolves under the twin forces of innovation and regulation, banks, non-banking financial companies (NBFCs), and fintech firms are reimagining how credit exposure is shared, mitigated, and capitalized. This paper analyzes the evolution and current landscape of CRT practices in India, examining key mechanisms such as securitization, credit derivatives, co-lending models, and digital risk-sharing platforms. It explores how these instruments contribute to regulatory capital optimization (RCO) under the Basel III framework while operating within India’s regulatory ecosystem shaped by the Reserve Bank of India (RBI) and the Securities and Exchange Board of India (SEBI). The analysis highlights how different institutions are balancing innovation and prudential regulation leveraging new technologies for efficiency while maintaining compliance with capital adequacy and transparency standards. The paper concludes with insights on emerging trends, risks, and the policy direction required to sustain innovation without compromising financial stability.
Keywords	Credit Risk Transfer, Securitization, Credit Derivatives
Field	Sociology > Banking / Finance
Published In	Volume 7, Issue 5, September-October 2025
Published On	2025-10-26
DOI	https://doi.org/10.36948/ijfmr.2025.v07i05.58943

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