RBI eases bank lending to REITs, InvITs

The State Bank of India>>> has issued final amendments allowing Commercial bank>>>s to lend to Real estate investment trusts and Business Trust in Indias. These new directions incorporate stakeholder feedback and introduce prudential safeguards on exposure limits, asset quality, and repayment structures. Key changes include permitting overseas branches of Indian banks to participate in REIT financing under syndication arrangements with a 20% cap and 150% risk weight, and replacing the insolvency mechanism requirement with a broader 'effective recovery mechanism' for overseas jurisdictions. The State Bank of India>>> rejected requests to finance land acquisition and under-construction assets through these structures. Eligibility norms were relaxed, linking them to cash-flow performance, requiring 80% of underlying assets to generate positive cash flows for at least one year. Restrictions on bullet and balloon repayment structures were retained, but repayments can align with cash flows. Aggregate bank exposure to REITs and InvITs and their underlying entities remains capped at 49% of asset value, with revised risk weights. AU Small Finance Bank>>>s are barred from extending acquisition finance to Business Trust in Indias.