Reserve Bank of India (RBI) proposes draft regulatory framework for bank lending to REITs and InvITs

Key facts

• The Reserve Bank of India (RBI) has released draft norms permitting banks to lend to Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs) registered with the Securities and Exchange Board of India (SEBI).
• To be eligible for bank financing, a REIT must be listed, have a minimum three-year operational track record, and have reported positive net distributable cash flows in the preceding two financial years.
• The aggregate credit exposure of all banks to a REIT, its underlying Special Purpose Vehicles (SPVs), and holding companies is capped at 49% of the asset value as of March 31 of the preceding financial year.
• Banks are permitted to extend loans only for operational or completed assets, while financing for land acquisition is strictly prohibited.
• The draft framework mandates amortised repayment schedules for loans and explicitly disallows bullet or balloon repayment structures.
• Lending must be fully secured through the mortgage of identified assets and a charge over receivables or escrow arrangements to prevent cash-flow diversion.
• Overseas branches of Indian banks are permitted to lend to overseas REITs provided the jurisdiction has an effective statutory insolvency or bankruptcy framework.
• The proposed directions are scheduled to come into force from July 1, 2026.