The Reserve Bank of India (RBI) has issued the Reserve Bank of India (Commercial Banks – Credit Facilities) Third Amendment Directions, 2026, introducing a comprehensive regulatory framework governing bank lending to Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs). The amendments, which will come into force from October 1, 2026, aim to facilitate financing to these investment vehicles while strengthening prudential safeguards and risk management standards.
A key feature of the amendment is the formal recognition of bank lending to SEBI-regulated and listed REITs and InvITs. The RBI has prescribed detailed eligibility conditions, requiring REITs and InvITs to maintain a significant proportion of income-generating assets with a proven track record of positive operational cash flows. Banks are also required to ensure that lending is not used to support financially stressed special purpose vehicles (SPVs) within these structures.
To strengthen governance and oversight, banks must establish Board-approved policies covering:
- Appraisal mechanisms
- Underwriting standards
- Debt Service Coverage Ratio (DSCR) benchmarks
- Exposure limits
- Monitoring frameworks
- Covenant structures
Lenders are also required to closely monitor the end-use of funds and verify that legal structures do not impede their rights to enforce security interests.
The amendment introduces prudential leverage controls, requiring the overall leverage of borrowing REITs and InvITs to remain within limits prescribed by SEBI or lower internal thresholds set by banks. Additionally, the aggregate exposure of all banks to a REIT or InvIT, together with its underlying SPVs and holding companies, cannot exceed 49 percent of the value of the trust’s assets. This measure is intended to prevent excessive leverage and promote financial stability.
The RBI has also prescribed stringent security requirements. Bank financing must be fully secured through mechanisms such as:
- Charges over underlying assets
- Assignment of cash flows and receivables
- Pledges of equity interests in SPVs
- Other enforceable security arrangements
In many cases, lenders must obtain a first charge or pari passu charge over the underlying assets. Loan agreements are expected to include robust creditor protection measures, including escrow arrangements, restrictions on additional borrowing, and safeguards against actions detrimental to lenders.
Further, the amendments align acquisition financing provisions for REITs and InvITs with existing acquisition finance regulations while providing certain exemptions to reflect their unique structures.
Overall, the Third Amendment Directions, 2026 establish a balanced framework that supports the growth of REITs and InvITs as financing and investment vehicles while ensuring prudent risk management and enhanced protection for the banking system.
