RBI Unveils New Lending Rules For REITs And InvITs With Exposure Limits

The Reserve Bank of India (RBI) has tightened the rules around bank funding for Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs), even as it formally allows lenders to extend credit directly to these investment vehicles.

The framework, released on Wednesday, says a REIT or InvIT must have at least 80% of its assets generating positive cash flows for a year before it can qualify for bank finance. It also places a 49% cap on the combined exposure of all banks to a trust, its holding entities, and special purpose vehicles (SPVs).

The directions will take effect from 1 October 2026, although banks can choose to adopt them earlier in full. The move comes as REITs and InvITs increasingly become a route for raising capital against stable, income-producing assets.

Why Has RBI Drawn Up Fresh Rules?

The central bank appears to be walking a fine line. It wants these trusts to have access to funding, but without exposing lenders to excessive risk.

Only REITs registered with the Securities and Exchange Board of India (SEBI) and listed on recognised exchanges will qualify. They must derive most of their value from completed assets that are already earning money. In practical terms, at least 80% of the portfolio should consist of operational properties that have delivered positive cash flows for a minimum of one year. Occupancy or completion certificates will also be necessary.

InvITs will face similar conditions. Banks can lend only if the underlying infrastructure projects are completed, commercially operational and have demonstrated a year's worth of positive cash generation.

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What Changes For Banks?

The RBI has made it clear that lenders cannot approach these loans casually. Banks must first put board-approved policies in place covering credit appraisal, underwriting practices, exposure limits and post-disbursement monitoring.

They also need to keep the borrowing trust within SEBI’s leverage limits or even tighter internal caps.

Repayments are shifting, too. The regulator has banned bullet and balloon structures that backload the principal. Instead, payouts must be spread more evenly over the loan’s life.

Plus, these loans must be backed by assets, receivables, and cash flows. The RBI’s message is clear: fund the growth, but keep it disciplined.

Sources:

The Economic Times

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