**Executive Summary**
This document is the Reserve Bank of India's (RBI) Second Amendment Directions, 2026, concerning credit facilities for commercial banks, specifically related to lending to Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs). It is a draft for comments and will come into force from July 1, 2026, or earlier if adopted entirely by a bank. These directions amend the RBI's existing guidelines on credit facilities for commercial banks.
**Key Points / Main Content**
* **Exposures to REITs:**
* A new sub-paragraph is inserted regarding "Exposures to Real Estate Investment Trusts (REITs)."
* Banks are permitted to lend to REITs registered with and regulated by SEBI.
* Overseas branches can lend to overseas-constituted REITs if an effective insolvency/bankruptcy mechanism is available.
* Banks lending to REITs should be mindful of legal provisions regarding security enforcement and ensure the trustee's borrowing is within the trust deed powers.
* Banks must monitor the end-use of funds to prevent financing of prohibited activities, such as land acquisition.
* Banks must establish a Board-approved policy on lending to REITs, covering appraisal, sanctioning, underwriting, exposure limits, and monitoring.
* REITs must be listed, have a three-year operational history with positive cash flows, and not be subject to adverse regulatory actions.
* Underlying SPVs of the REIT must not be facing financial difficulty as defined by the RBI.
* Refinancing of existing SPV term loans must only involve completed projects with Completion/Occupancy Certificates.
* Lending must be through loans without bullet or ballooning principal repayments.
* Banks must assess critical parameters, including cash flow sufficiency, for debt servicing.
* Aggregate credit exposure of banks to a borrowing REIT and its underlying SPVs/holdcos must not exceed 49% of the REIT's asset value as of March 31st of the previous financial year.
* Bank finance to REITs must be fully secured by a mortgage on identified assets at either the REIT or SPV/holdco level, not both. Existing loans at the SPV/holding company level must be liquidated when a facility is extended at the REIT level.
* Banks must create a charge over receivables or establish an escrow mechanism to prevent cash flow diversion.
* **Lending to InvITs:**
* Paragraph 137A is substituted to address lending to InvITs.
* Banks are permitted to lend to InvITs registered with and regulated by SEBI.
* Banks should be mindful of legal provisions regarding security enforcement.
* Banks must monitor the end use of funds to prevent financing of prohibited activities, such as land acquisition.
* Banks must establish a Board-approved policy on lending to InvITs, covering appraisal, sanctioning, underwriting, exposure limits, and monitoring.
* Lending must be to those InvITs whose underlying SPVs aren't facing financial difficulty as defined by RBI.
* Bank finance for InvITs acquiring equity of other entities shall be subject to conditions in Chapter XI - Acquisition Finance.
* Lending must be through loans without bullet or ballooning principal repayments.
* InvITs must be listed, have a three-year operational history with positive cash flows, and not be subject to adverse regulatory actions.
* Banks must 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.
* Aggregate credit exposure of all banks to the borrowing InvIT and its underlying SPVs/ holdcos must not exceed 49% of the InvIT assets.
* Bank finance to InvITs must be fully secured by way of a charge on identified assets.
* Banks must create a charge over receivables or establish an escrow mechanism to prevent cash flow diversion.
**Impact Analysis**
**Stakeholder: Commercial Banks**
* **Impact:** Banks are provided with updated guidelines and permissions for lending to REITs and InvITs. The directions specify conditions and limitations regarding this lending.
* **Action Required:** Commercial banks need to review and implement these directions. They must formulate Board-approved policies, monitor end-use of funds, and ensure compliance with exposure limits and security coverage requirements. They must also adopt the direction in its entirety by July 1, 2026, or earlier.
**Stakeholder: Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs)**
* **Impact:** REITs and InvITs are impacted by the eligibility criteria for receiving bank loans, including registration, operational history, and financial health of underlying SPVs.
* **Action Required:** REITs and InvITs need to ensure they meet the eligibility criteria to access bank financing.
**Stakeholder: Securities and Exchange Board of India (SEBI)**
* **Impact:** SEBI's regulations and oversight of REITs and InvITs are directly referenced, with banks being permitted to lend to entities registered with and regulated by SEBI.
* **Action Required:** No action specifically mentioned.
Key Entities Referenced
Reserve Bank of India (Commercial Banks – Credit Facilities) Second Amendment Directions, 2026: The primary subject; directions issued by the RBI regarding lending to REITs and InvITs by commercial banks.
Reserve Bank of India (Commercial Banks – Credit Facilities) Directions, 2025: The original directions which the Second Amendment Directions, 2026 modifies.
Banking Regulation Act, 1949: Act that gives the RBI the power to issue these directions.
Real Estate Investment Trusts (REITs): One of the investment vehicles to which the directions pertain.
Securities and Exchange Board of India (SEBI): Regulatory body that registers and regulates REITs and InvITs; directions permit banks to lend to REITs and InvITs registered with and regulated by SEBI.
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