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Informist, Friday, Feb. 13, 2026

 

--RBI issues draft norms for bank lending to REITs 

--RBI: Seek comments on bank lending to REITs, InvITs draft by Mar 6 
 

NEW DELHI/MUMBAI – The Reserve Bank of India Friday issued draft amendment directions on lending to Real Estate Investment Trusts and Infrastructure Investment Trusts. It sought comments on the draft by Mar. 6. RBI Governor Sanjay Malhotra had announced the regulator's plans to allow banks to lend to REITs at the outcome of the Monetary Policy Committee meeting on Feb. 6.

 

"The above draft Amendment Directions propose to permit commercial banks to extend finance to REITs, subject to appropriate prudential safeguards including regulatory ceiling for exposure to REITs," the RBI said in the release. The regulator has also proposed tweaking lending norms for commercial banks, small finance banks and All India Financial Institutions for InvITs, which was already allowed, to bring them in line with the newer directions for real estate trusts. 

 

The final norms will take effect from Jul. 1.

 

According to the draft norms, banks can only lend to REITs and InvITs that are registered with and regulated by the Securities and Exchanges Board of India. Overseas bank branches are also allowed to lend to constituted overseas if an effective insolvency or bankruptcy mechanism is available in the relevant jurisdiction. "A bank shall strictly monitor the end use of funds lent to REITs to ensure that this route is not being used to finance activities which are not permitted, such as land acquisition, even where such acquisition forms part of a project," the central bank said. The same condition applies for InvITs as well. 

 

RBI has also mandated banks willing to lend to REITs and InvITs to put in place a board-approved policy covering appraisal mechanism, sanctioning conditions, underwriting norms, including metrics such as the debt service coverage ratio and their corresponding benchmark levels, internal limits for individual exposures as well as the aggregate portfolio, and monitoring mechanisms, including stipulation of appropriate covenants.

 

Banks can also lend to REITs and InvITs that are listed, completed minimum three years of operations, with a positive 'net distributable cash flows' in the preceding two financial years, should not have been subject to any material adverse regulatory action during the previous three years, none of the underlying special purpose vehicles under the REIT or InvIT is facing 'financial difficulty', and lending via only way of loans not involving bullet or ballooning principal repayments.

 

As per the central bank, banks will also have to assess all critical parameters, including sufficiency of cash flows at REIT or InvIT level, to ensure timely debt servicing. "The aggregate credit exposure of all banks to the borrowing REIT and its underlying SPVs/holding companies taken together, shall not exceed 49% of the value of the REIT's assets as on Mar. 31 of the previous financial year, or such lower limit as may be decided by the bank's Board based on the credit rating of the REIT or otherwise," RBI said. The ceiling for lending to InvITs is the same. 

 

In terms of security against lending, bank finance to REITs and InvITs shall be fully secured by way of mortgage of identified assets. "The bank shall also create a charge over receivables from the underlying assets and / or establish an escrow mechanism to prevent diversion of cash flows," it said.

 

Reported by Priyasmita Dutta and Aaryan Khanna

Edited by Deepshikha Bhardwaj

 

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