**Executive Summary**
The Reserve Bank of India (RBI) issues the Second Amendment Directions, 2026, concerning credit facilities for commercial banks regarding Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs). The directions permit banks to lend to REITs and InvITs registered with and regulated by SEBI, subject to specific conditions. These directions will come into force from July 1, 2026, or earlier if adopted by a bank entirely. The draft is provided for comments.
**Key Points / Main Content**
* **Lending to REITs:**
* Banks are permitted to lend to REITs registered with and regulated by SEBI.
* Overseas branches may lend to REITs constituted overseas if an effective insolvency/bankruptcy mechanism is available in the relevant jurisdiction.
* Banks must monitor the end-use of funds to ensure they are not used for impermissible activities like land acquisition.
* Lending must be in the form of loans not involving bullet or ballooning principal repayments.
* **General Conditions for REITs Lending:**
* Banks must have a Board-approved policy covering appraisal, sanctioning, underwriting norms (including DSCR), internal limits, and monitoring mechanisms.
* Lending is restricted to REITs that are listed, have a minimum of three years of operations with positive net distributable cash flows in the preceding two financial years, and have not been subject to material adverse regulatory action in the past three years.
* None of the underlying SPVs under the REIT should be facing "financial difficulty" as defined in RBI Directions, 2025.
* If financing is for refinancing existing term loans of SPVs, it should only be for completed projects with Completion Certificates (CC) or Occupancy Certificates (OC).
* **Prudential Ceiling on Leverage for REITs:**
* Banks must assess critical parameters, including sufficiency of cash flows for timely debt servicing.
* Aggregate credit exposure of all banks to a REIT and its SPVs/holdcos shall not exceed 49% of the REIT's asset value as of March 31st of the previous financial year, or a lower limit decided by the bank's Board.
* **Security Coverage for REITs:**
* Bank financing must be fully secured by a mortgage of identified assets.
* Financing can be extended at the REIT level or SPV/holdco level, but not at both. Existing loans at the SPV/holding company level must be liquidated if the facility is extended at the REIT level.
* Banks must create a charge over receivables or establish an escrow mechanism to prevent diversion of cash flows.
* **Lending to InvITs:**
* Paragraph 137A of Chapter IX (Infrastructure Financing) is substituted to permit banks to lend to InvITs registered and regulated by SEBI.
* Same conditions as for REITs apply to InvITs regarding security, trustee powers, end-use monitoring, and general conditions.
* **General Conditions for InvITs Lending:**
* A bank shall put in place a Board approved policy on lending to InvITs, which shall, inter alia, cover appraisal mechanism, sanctioning conditions, underwriting norms, including metrics such as the debt service coverage ratio (DSCR) and their corresponding benchmark levels, internal limits for individual exposures as well as the aggregate portfolio, and monitoring mechanisms, including stipulation of appropriate covenants.
* A bank shall lend to only those InvITs where none of the underlying SPVs is facing 'financial difficulty' as defined in the Reserve Bank of India (Commercial Banks- Resolution of Stressed Assets) Directions, 2025.
* Bank finance to InvITs for acquiring equity of other entities shall be subject to the relevant conditions given in Chapter XI - Acquisition Finance.
* Lending to an InvIT by a bank shall only be by way of loans not involving bullet or ballooning principal repayments.
* **Prudential Ceiling on Leverage for InvITs:**
* Without prejudice to generality, a bank shall undertake assessment of all critical parameters including sufficiency of cash flows at InvIT level to ensure timely debt servicing.
* Overall leverage of the borrowing InvIT shall be within the prudential ceiling prescribed by SEBI, or such lower limit as may be decided by the bank's Board.
* The aggregate credit exposure of all banks to the borrowing InvIT and its underlying SPVs/ holdcos taken together, shall not exceed 49% of the value of the InvIT assets, or such lower limit as may be decided by a bank's Board based on the credit rating of the InvIT or otherwise.
* **Security Coverage for InvITs:**
* Bank finance to InvITs shall be fully secured by way of a charge on identified assets. The financing against a specified asset across all banks and AIFIs shall be extended either at the InvIT level or at the SPV/holdco level, but not at both levels. Where a facility is extended at the InvIT level against a specified asset, any existing loan at the SPV or holding company level in respect of such asset shall be fully liquidated.
* The bank shall also create a charge over receivables from the underlying assets and / or establish an escrow mechanism to prevent diversion of cash flows."
**Impact Analysis**
**Commercial Banks**
*Impact:*
* Banks are given the opportunity to lend to REITs and InvITs, potentially expanding their lending portfolio. They also face new regulations and restrictions on lending to these entities.
*Action Required:*
* Banks need to establish Board-approved policies for lending to REITs and InvITs, monitor end-use of funds, ensure compliance with prudential ceilings on leverage, and maintain adequate security coverage.
**REITs and InvITs**
*Impact:*
* REITs and InvITs will have increased access to bank financing, but they must meet specific criteria to be eligible.
*Action Required:*
* REITs and InvITs need to ensure they meet the eligibility criteria specified in the directions, including being listed, having a minimum operating history, and not facing financial difficulty.
**Securities and Exchange Board of India (SEBI)**
*Impact:*
* REITs and InvITs are regulated by SEBI.
*Action Required:*
* No action is required.
Key Entities Referenced
Reserve Bank of India (Commercial Banks – Credit Facilities) Second Amendment Directions, 2026: Second amendment directions issued by RBI regarding credit facilities by commercial banks to REITs and InvITs.
Banking Regulation Act, 1949: The Act that empowers the RBI to regulate banks in India, specifically sections 21 and 35A are cited as the source of authority for these directions.
Reserve Bank of India: The central bank of India, responsible for issuing the directions.
SEBI: Securities and Exchange Board of India, the regulator for REITs and InvITs in India; banks can lend to REITs/InvITs registered and regulated by them
Real Estate Investment Trusts (REITs): An investment vehicle in real estate, covered by the amendment directions
भारतीय ररज़र्व बैंक
RESERVE BANK OF INDIA
RBI/2025-26/<>
DOR.CRE.REC. /07.01.001/2025-26 DD-MM-YYYY
Reserve Bank of India (Commercial Banks – Credit Facilities) Second
Amendment Directions, 2026 – Draft for Comments
Please refer to the Reserve Bank of India (Commercial Banks – Credit Facilities)
Directions, 2025 (hereinafter referred to as ‘Directions’).
2. On a review, and in exercise of the powers conferred by Sections 21 and 35A of the
Banking Regulation Act, 1949 and all other provisions / laws enabling the Reserve
Bank of India in this regard, the Reserve Bank of India, being satisfied that it is
necessary and expedient in public interest so to do, hereby, issues the Second
Amendment Directions hereinafter specified.
3. The Second Amendment Directions modify the Directions as under:
3(1) In paragraph 5 of Chapter II, the following sub-paragraph shall be inserted,
namely:
“5(17) Exposures to Real Estate Investment Trusts (REITs).”
3(2) After paragraph 133 of Chapter VIII, the following new Section F, its sub-sections,
and paragraphs shall be inserted as under:
“F. Lending to Real Estate Investment Trusts (REITs)
133A. Banks shall be permitted to lend to REITs which are registered
with and regulated by SEBI.
133B. Overseas branches may lend to REITs constituted overseas if an
effective insolvency / bankruptcy mechanism, either statutory or
regulatory, is available in the relevant jurisdiction.Reserve Bank of India (Commercial Banks – Credit Facilities) Second Amendment Directions, 2026
133C. As REITs are trusts, the bank shall be mindful of the legal
provisions in respect of these entities especially those regarding
enforcement of security. Specifically, the bank shall establish that the
borrowing by the trustee is well within the powers allowed under the
respective trust deed.
133D. A bank shall 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.
F1. General Conditions
133E. A bank shall put in place a Board approved policy on lending to
REITs, which shall, inter alia, cover appraisal mechanism, sanctioning
conditions, underwriting norms, including metrics such as the debt
service coverage ratio (DSCR) and their corresponding benchmark
levels, internal limits for individual exposures as well as the aggregate
portfolio, and monitoring mechanisms, including stipulation of
appropriate covenants.
133F. A bank may lend only to a REIT which satisfies the following
conditions:
(i) REIT is listed;
(ii) REIT has completed minimum three years of operations, with a
positive ‘net distributable cash flows’ in the preceding two
financial years.
(iii) REIT should not have been subject to any material adverse
regulatory action during the previous three years.
(iv) None of the underlying SPVs under the REIT is facing ‘financial
difficulty’ as defined in the Reserve Bank of India (Commercial
Banks– Resolution of Stressed Assets) Directions, 2025.
133G. Where bank financing is for the purpose of refinancing of existing
term loans of SPVs, 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.Reserve Bank of India (Commercial Banks – Credit Facilities) Second Amendment Directions, 2026
133H. Lending to a REIT by a bank shall only be by way of loans not
involving bullet or ballooning principal repayments.
F2. Prudential Ceiling on Leverage
133I. Without prejudice to generality, a bank shall undertake
assessment of all critical parameters including sufficiency of cash flows
at REIT level to ensure timely debt servicing.
133J. The aggregate credit exposure of all banks to the borrowing REIT
and its underlying SPVs/ holdcos taken together, shall not exceed 49%
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
based on the credit rating of the REIT or otherwise.
F3. Security Coverage
133K. Bank finance to REITs shall be fully secured by way of mortgage
of identified assets. The financing against a specified property across all
banks shall be extended either at the REIT level or at the SPV/holdco
level, but not at both levels. Where a facility is extended at the REIT level
against a specified property, any existing loan at the SPV or holding
company level in respect of such property shall be fully liquidated.
133L. The bank shall also create a charge over receivables from the
underlying properties and / or establish an escrow mechanism to prevent
diversion of cash flows.”
3(3) In ‘Chapter IX – Infrastructure Financing’ of the Directions, paragraph 137A shall
be substituted with the following paragraph, namely:
“137A. Lending to InvITs:
(1) Banks shall be permitted to lend to InvITs which are registered with and
regulated by SEBI.
(2) As InvITs are trusts, the bank shall be mindful of the legal provisions in
respect of these entities especially those regarding enforcement of security.Reserve Bank of India (Commercial Banks – Credit Facilities) Second Amendment Directions, 2026
Specifically, the bank shall establish that the borrowing by the trustee is well
within the powers allowed under the respective trust deed.
(3) A bank shall strictly monitor the end use of funds lent to InvITs 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.
(4) General Conditions:
(i) A bank shall put in place a Board approved policy on lending to InvITs,
which shall, inter alia, cover appraisal mechanism, sanctioning
conditions, underwriting norms, including metrics such as the debt
service coverage ratio (DSCR) and their corresponding benchmark
levels, internal limits for individual exposures as well as the
aggregate portfolio, and monitoring mechanisms, including
stipulation of appropriate covenants.
(ii) A bank shall lend to only those InvITs where none of the underlying
SPVs is facing ‘financial difficulty’ as defined in the Reserve Bank of
India (Commercial Banks– Resolution of Stressed Assets)
Directions, 2025.
(iii) Bank finance to InvITs for acquiring equity of other entities shall be
subject to the relevant conditions given in Chapter XI – Acquisition
Finance.
(iv) Lending to an InvIT by a bank shall only be by way of loans not
involving bullet or ballooning principal repayments.
(v) A bank may lend only to an InvIT which satisfies the following
conditions:
a) InvIT is listed;
b) InvIT has completed minimum three years of operations, with
a positive ‘net distributable cash flows’ in the preceding two
financial years.
c) InvIT should not have been subject to any material adverse
regulatory action during the previous three years.Reserve Bank of India (Commercial Banks – Credit Facilities) Second Amendment Directions, 2026
(5) Prudential Ceiling on Leverage:
(i) Without prejudice to generality, a bank shall undertake assessment
of all critical parameters including sufficiency of cash flows at InvIT
level to ensure timely debt servicing.
(ii) Overall leverage of the borrowing InvIT shall be within the prudential
ceiling prescribed by SEBI, or such lower limit as may be decided by
the bank’s Board.
(iii) The aggregate credit exposure of all banks to the borrowing InvIT
and its underlying SPVs/ holdcos taken together, shall not exceed
49% of the value of the InvIT assets, or such lower limit as may be
decided by a bank’s Board based on the credit rating of the InvIT or
otherwise.
(6) Security Coverage
(i) Bank finance to InvITs shall be fully secured by way of a charge on
identified assets. The financing against a specified asset across all
banks and AIFIs shall be extended either at the InvIT level or at the
SPV/holdco level, but not at both levels. Where a facility is extended
at the InvIT level against a specified asset, any existing loan at the
SPV or holding company level in respect of such asset shall be fully
liquidated.
(ii) The bank shall also create a charge over receivables from the
underlying assets and / or establish an escrow mechanism to prevent
diversion of cash flows.”
4. These Directions shall come into force from July 1, 2026, or an earlier date when
adopted by a bank in entirety.
(Vaibhav Chaturvedi)
Chief General Manager