RBI Issues Draft Directions On Lending To REITs And InvITs

 Draft Guidelines Explained  
The RBI’s draft framework allows banks to lend to listed REITs and InvITs that have operated for at least three years and reported positive distributable cash flows in the past two years. Trusts must also be free from adverse regulatory actions during the preceding three years.  

Exposure Limits And Safeguards  
Banks’ exposure to REITs will be capped at 10 percent of their eligible capital base, while overall exposure to each trust cannot exceed 49 percent of its asset value. Lending policies must be board-approved, and strict monitoring of fund usage will be mandatory to mitigate risks.  

Market Impact  
By aligning REIT lending norms with those already applicable to InvITs, the RBI aims to create parity between the two structures. Analysts believe this move will unlock new financing avenues for real estate and infrastructure projects, while diversifying banks’ lending portfolios.  

Key Highlights 

• Draft norms allow banks to lend to listed REITs and InvITs  
• Minimum three years of operations required for eligibility  
• Positive cash flows in last two years mandatory  
• Exposure capped at 10 percent of bank’s capital base  
• Overall exposure limited to 49 percent of trust’s asset value  
• Mandatory monitoring of fund usage and board-approved policies  

Conclusion  
The RBI’s draft amendment directions mark a significant step in strengthening India’s financial ecosystem. By opening credit channels for REITs and InvITs while enforcing prudential safeguards, the move is expected to boost real estate and infrastructure financing without compromising stability.  

Sources: Reserve Bank of India, Economic Times, Business Standard