RBI issues amendment directions on bank lending to REITs and InvITs

On June 10, 2026, the Reserve Bank of India (RBI) issued the Reserve Bank of India (Commercial Banks- Credit Facilities) Third Amendment Directions, 2026 (Amendment Directions) following a review of stakeholder feedback received on the draft amendment directions released by the RBI on February 13, 2026 (which can be accessed here). The Amendment Directions iintroduce a detailed prudential and operational framework governing bank finance to Real Estate Investment Trusts (REITs) and revised the existing norms applicable to Infrastructure Investment Trusts (InvITs).

The Amendment Directions: (i) reclassify the real estate and infrastructure credit facility heads to expressly include REITs and InvITs; (ii) insert an entirely new Section F in Chapter VIII governing lending to REITs; and (iii) substitute the existing paragraph on lending to InvITs in Chapter IX with a new, more granular framework.

Key highlights of the Amendment Directions are outlined below:

1. Recasting of sectoral credit facility heads: The Amendment Directions amend paragraph 5 of Chapter II to expressly refer to REITs and InvITs within the real estate and infrastructure sector credit facility categories, by substituting paragraph 5(6) with “Credit facilities to Real Estate Sector including Real Estate Investment Trusts (REITs)” and paragraph 5(14) with “Credit facilities to Infrastructure Sector including Infrastructure Investment Trusts (InvITs)”. This formalizes the inclusion of REITs and InvITs within the regulated universe of sector-specific credit exposures.

2. New framework for lending to REITs and InvITs: To ensure regulatory parity across investment trusts, the RBI has prescribed unified qualitative, leverage and security parameters applicable to both REITs and InvITs:

1. 1. Eligibility and general governance:

• • • Banks may only lend to Securities and Exchange Board of India (SEBI)-registered, listed REITs or InvITs. At least 80% of the underlying assets of such REITs and InvITs must be completed, revenue-generating projects / properties and these assets must have generated positive operational cash flows for a minimum period of one year.

• • • Banks must establish a board-approved policy governing lending to REITs and InvITs, covering inter alia appraisal norms, sanctioning conditions, underwriting standards (including debt service coverage ratio (DSCR) benchmarks), borrower / portfolio exposure limits and valuation methodology scrutiny.

• • • Bank finance cannot be used to fund underlying special purpose vehicles (SPVs) that are currently facing “financial difficulty” under the Reserve Bank of India Stressed Assets Directions, 2025.

• • • Refinancing SPV debt is strictly restricted to completed projects that have received Completion Certificates (CC) / Occupancy Certificates (OC) (for REITs) or achieved Commercial Operation Date (COD) (for InvITs).

• • • Strict end-use tracking is mandated to prevent unauthorized activities. For overseas branches of Indian banks participating in foreign syndications, certain provisions are carved out provided the bank’s total contribution across overseas branches does not exceed 20% of total deal funding and the trust is listed/regulated in the relevant foreign jurisdiction.

1. 2. Prudential ceiling on leverage and system-wide exposure: 

• • • Individual entity cap: Borrowing trusts must remain within SEBI’s prescribed statutory leverage limits (or a lower limit set by the bank’s board).

• • • System-wide aggregate cap (49% ceiling): Total aggregate exposure of all banks to a borrowing trust inclusive of its underlying SPVs and holding companies must not exceed 49% of the gross value of the trust’s assets (without netting cash and cash equivalents). Asset values are calculated based on the latest annual audited (March 31) or half-yearly (September 30) valuation under SEBI regulations, whichever is later. Fund-based facilities (including bonds, debentures, commercial paper) and credit equivalents of non-fund-based facilities are included within the scope of exposure.

1. 3. Repayment profile and structural safeguards:

• • • Credit facilities must avoid bullet or ballooning repayment structures that concentrate principal payouts at maturity, though repayment schedules may be aligned with projected cash flows. This restriction, however, does not apply to subscription in bonds, debentures, or commercial paper.

• • • Loans must be fully secured by: (A) charge over underlying immovable property (mandatory exclusive or first pari passu charge whenever financing direct or indirect property acquisitions, development, or debt refinancing); (B) assignment of rental / project cash flows and receivables via ring-fenced escrow accounts; and (C) pledge of equity interests held by the trust in its underlying SPVs.

• • • Loan contracts must enforce strict negative covenants (e.g., restrictions on incurring additional debt without consent) and incorporate step-in rights or minimum termination payment mechanisms to mitigate early project termination risks (specifically for InvITs). 

3. Tailored framework for acquisition finance: Bank finance extended to a REIT or InvIT for acquiring equity stakes in other entities, holding companies, or SPVs is regulated under Chapter XI (Acquisition Finance), subject to specific relaxations:

• • Trusts are exempted from the requirement that the acquiring entity must be a non-financial company.

• • For downstream holdings, “non-financial subsidiary” includes a “holding company” as defined under the respective SEBI regulations applicable to REITs or InvITs.

• • The requirement for net profit after tax across the preceding three consecutive financial years and the general limitations and prudential safeguards for acquisition finance under Paragraphs 170J, 170K, 170L, and 170O are disapplied for acquisition finance extended directly to REITs and InvITs.

The Amendment Directions will be effective from October 1, 2026, or an earlier date if a bank adopts them in entirety. Pre-existing non-compliant loans granted to InvITs prior to the effective date are permitted to run off until maturity. However, such facilities cannot be renewed, reviewed, or extended on the same or different terms after expiry (even if renewal is contractually provided), and sanctioned limits cannot be enhanced, unless the renewed or enhanced facilities are brought into full compliance with the amended directions.

Conclusion:

The Amendment Directions establish a comprehensive, risk-calibrated regime for bank exposures to REITs and InvITs. By combining an aggregate 49% system-wide leverage ceiling with mandatory property-backed security, strict cash-flow escrowing, and tailored acquisition financing rules, the RBI has widened formal credit access for real estate and infrastructure platforms while maintaining robust lender protection and financial stability.