As REITs are trusts, the bank will need to be mindful of the legal provisions in respect of these entities especially those regarding enforcement of security.
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FRANCIS MASCARENHAS
The Reserve Bank of India’s (RBI) plans to allow Banks to lend to SEBI-registered Real Estate Investment Trusts (REITs) provided the Trusts are listed and have a minimum three-year operational history with positive cash flows, per Reserve Bank of India (Commercial Banks – Credit Facilities) (Draft) Second Amendment Directions, 2026..
Alongside, the central bank also issued updated draft guidelines for bank’s exposure to Infrastructure Investment Trust (InvITs), These are similar to the one issued for bank lending to REITs.
The central bank said the aggregate credit exposure of all banks to the borrowing REIT and its underlying SPVs/ holdcos (special purpose vehicles/ holding companies) taken together, cannot exceed 49 per cent of the value of the REIT’s assets as on March 31st of the previous financial year, or such lower limit as may be decided by the bank’s Board.
Lending to a REIT by a bank can only be by way of loans not involving bullet or ballooning principal repayments.
A bank should 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 permitted, such as land acquisition, even where such acquisition forms part of a project.
Overseas branches can lend to REITs constituted overseas if an effective insolvency / bankruptcy mechanism, either statutory or regulatory, is available in the relevant jurisdiction.
Legal provisions
As REITs are trusts, the bank will need to be mindful of the legal provisions in respect of these entities especially those regarding enforcement of security.
Where bank financing is for the purpose of refinancing of existing term loans of SPVs (special purpose vehicles), it shall be ensured that it is undertaken only in respect of completed projects that have received a Completion Certificate (CC), Occupancy Certificate (OC), or their equivalent.
Published on February 13, 2026
