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Informist, Wednesday, Jun. 10, 2026

 

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--RBI issues final norms on lending to REITs, InvITs 
--RBI to not amend norms on bks' presentation, disclosure of fincl statements 
--RBI: Banks can lend to REITs registered with, regulated by SEBI 
--RBI: Banks to strictly monitor the end use of funds lent to REITs 
--RBI:Bk loans only to listed REITs with 80% assets making positive cashflow 
--RBI:Bks' loans to REITs to not have bullet, ballooning repayment structure 
--RBI: Banks' total exposure to a REIT not to exceed 49% of borrowers assets 

 

 

NEW DELHI – The Reserve Bank of India Wednesday mandated that banks can only lend to listed Real Estate Investment Trusts and Infrastructure Investment Trusts that have at least 80% underlying assets generating positive cashflow from operations for a period of not less than one year.

 

The final directions for banks lending to REITs and InvITs said banks can only lend to REITs and InvITs that are registered with and regulated by the Securities and Exchanges Board of India. Lending to REITs undertaken by overseas branches of Indian banks is not required to be registered with SEBI if the funding contribution of a bank under a syndication arrangement for a particular deal, across all its overseas branches does not exceed 20% of total funding under the deal. 

 

The 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.

 

"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 directly permitted to be financed under the extant regulations," the RBI said.

 

Banks should not extend credit facilities to a REIT and InvIT that involves bullet or ballooning repayment structures, so as to ensure that a disproportionate portion of principal repayment is not concentrated in the terminal phase of the loan tenure. However, this shall not preclude structuring the repayment schedule in line with projected cash flows, it added. 

 

 

Without prejudice to generality, a bank will undertake assessment of all critical parameters, including sufficiency of cash flows at REIT and InvIT level, to ensure timely debt servicing, the RBI said, adding that the overall leverage of the borrowing REIT or InvIT should be within the prudential ceiling prescribed by SEBI, or such lower limit as may be decided by the bank's board. 

 

Further, the central bank mandated that the aggregate exposure of all banks to a borrowing REIT or InvIT, together with its underlying special purpose vehicle or holding companies, should not exceed 49% of the value of the REIT or InvIT's assets, or such lower limit as may be decided by the bank's board.

 

The RBI also said that banks' financing to a REIT or InvIT have to be fully secured by charge over the underlying immovable property, an assignment of rental cash flows and receivables, a pledge of equity interests held by the REIT or InvIT in the relevant special purpose vehicle, and such other legally enforceable security interests as may be applicable.

 

Further, the contractual provisions of the loan agreement have to provide for a high degree of protection for an InvIT and REIT lender, which should include, but not be limited to, provisions of an escrow account for ringfencing the project cash flows, the RBI said.  

 

These directions will come into force from Oct. 1, or an earlier date when adopted by a bank in entirety, RBI said. "With a view to ensuring non-disruptive implementation of amendments issued vide these Amendment Directions, a bank is permitted to let its existing loans to InvITs which are not in conformity with these amendments as on the effective date of these Amendment Directions to run-off till maturity," it added. 

 

However, the bank should not review or renew such loans after their expiry on same or different terms, even if such renewal is provided in the contract, or enhance the limits sanctioned prior to the date of these directions coming into force, it added.  End

 

Reported by Pratiksha

Edited by Avishek Dutta

 

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