The Reserve Bank of India (RBI) has issued the Reserve Bank of India (Commercial Banks – Credit Facilities) Third Amendment Directions, 2026 under Sections 21 and 35A of the Banking Regulation Act, 1949. The amendments introduce a comprehensive framework governing bank lending to Real Estate Investment Trusts (REITs) and strengthen the existing regulatory framework for Infrastructure Investment Trusts (InvITs).
Inclusion of REITs and InvITs in Sectoral Lending Provisions
RBI has amended Chapter II of the Directions to expressly include REITs within lending to the real estate sector and InvITs within lending to the infrastructure sector. This provides formal recognition of these investment vehicles within the bank credit framework.
New Framework for Lending to REITs
A new Section F has been inserted in Chapter VIII permitting banks to lend to SEBI-registered and regulated REITs. Banks may lend only to listed REITs having at least 80% of underlying assets generating positive operational cash flows for a minimum period of one year. Banks are required to formulate Board-approved policies covering appraisal, underwriting standards, exposure limits, DSCR benchmarks, and monitoring mechanisms.
Restrictions and End-use Monitoring
Banks must ensure strict monitoring of end-use of funds and prevent the use of REIT financing to support stressed SPVs. Refinancing of existing SPV debt is permitted only for completed projects that have obtained Completion Certificates (CC), Occupancy Certificates (OC), or equivalent approvals. Loan structures involving bullet or balloon repayments are generally prohibited, except for investments in debt securities such as bonds, debentures, and commercial paper.
Acquisition Finance and Prudential Limits for REITs
Bank finance provided to REITs for acquisitions will be subject to the acquisition finance framework under Chapter XI, with certain relaxations. RBI has also prescribed prudential leverage safeguards, including a cap whereby aggregate exposure of all banks to a REIT and its underlying SPVs/holding companies cannot exceed 49% of the value of the REIT's assets. Banks must additionally ensure compliance with SEBI-prescribed leverage limits.
