The Reserve Bank of India (RBI) has released draft amendment directions allowing commercial banks to lend to Real Estate Investment Trusts (REITs) for the first time, harmonizing rules with Infrastructure Investment Trusts (InvITs) to promote balanced funding for income-generating assets.
Key Highlights of the Draft
These proposals, announced post the February 6, 2026, Statement on Developmental and Regulatory Policies, introduce prudential safeguards like regulatory exposure ceilings and board-approved lending policies for REITs. InvIT lending norms—previously applicable to commercial banks, small finance banks, and All India Financial Institutions—are aligned for parity, given the trusts’ similar structures and risk profiles.
Banks must monitor underlying special purpose vehicles (SPVs) for financial distress and adhere to equity exposure limits, ensuring systemic stability.
Historical Context and Rationale
Earlier restrictions barred banks from REIT lending to prioritize market-based refinancing for real estate, while InvITs gained access with limits under SEBI oversight. The shift acknowledges matured SEBI regulations for listed REITs, aiming to deepen capital markets and support real estate growth without compromising prudential norms.
This follows RBI’s pattern of calibrated liberalization, as seen in prior InvIT relaxations.
Implications for Banks and Investors
Banks gain a new avenue for diversified lending, potentially boosting real estate and infrastructure funding amid economic recovery. Industry voices, including REIT CEOs, hail it as a boost to liquidity, though strict ceilings mitigate concentration risks.]
For compliance teams, this means updating policies, enhancing due diligence on SPVs, and tracking public comments solicited by RBI for final directions.
Next Steps and Outlook
Stakeholders have a window to submit feedback, refining safeguards before issuance. This move signals RBI’s pro-growth stance under evolving financial regulations, fostering parity between REITs and InvITs while safeguarding banking stability.
