India's Reserve Bank proposes key safeguards for banks' lending to REITs and real estate, capping exposures to bolster financial stability amid capital market risks. This draft circular aims to enable prudent funding while curbing potential vulnerabilities in commercial real estate lending.
On February 13, 2026, India's central bank issued amendment directions on capital market exposure, focusing on Real Estate Investment Trusts (REITs) and overall real estate lending. The proposals seek to balance growth in real estate investment with robust risk management for banks. These measures build on existing prudential norms to prevent over-leverage in high-risk sectors.
Key Exposure Safeguards
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REIT lending limited to 10% of bank's eligible capital, within commercial real estate ceiling
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Internal board-approved limits mandated for total real estate exposure across banks
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Loans restricted to listed REITs with 3+ years operations, positive cash flows, no regulatory actions
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Aggregate bank credit to REIT and SPVs capped at 49% of prior year's asset value
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Strict end-use monitoring required to block non-permitted activities
These RBI proposals invite feedback until March 6, 2026, effective July onward, signaling proactive oversight in India's dynamic banking landscape.
Sources: Reuters, The Economic Times, New Indian Express