RBI considering allowing banks to lend to REITs

The Reserve Bank of India on Friday proposed to allow banks to lend to Real Estate Investment Trusts REITs with certain prudential safeguards to deepen the financing pool for the real estate sectorREITs are investment vehicles that own or operate incomegenerating real estate enabling investors to earn a share of the income produced without directly purchasing propertiesREITs and Infrastructure Investment Trusts InvITs were conceptualised in India to free up banks funds in completed and operational real estate and infrastructure projects by refinancing such exposures with pooled funds of institutions and retail investorsConsistent with these objectives commercial banks were not permitted ab initio to lend to these entities the Reserve Bank said While bank lending to InvITs was allowed subsequently lending to REITs was not permitted To further promote financing to the real estate sector it is proposed to allow banks to lend to REITs with certain prudential safeguards RBI Governor Sanjay Malhotra said while unveiling the bimonthly monetary policyRBIs Statement on Developmental and Regulatory Policies said it is proposed to permit commercial banks to extend finance to REITs after review and considering the presence of a strong regulatory and governance framework for listed REITsThe existing guidelines in respect of lending to InvITs are also being harmonised for parity with prudential safeguards proposed for lending to REITs it addedAt present there are five listed REITs in India Brookfield India Real Estate Trust Embassy Office Parks REIT Mindspace Business Parks REIT Nexus Select Trust and Knowledge Realty TrustDraft directions will be issued shortly for public consultation the central bank saidIn the Union Budget Finance Minister Nirmala Sitharaman had proposed to accelerate recycling of real estate assets owned by Central Public Sector Enterprises CPSEs through the setting up of dedicated REITsThe RBI also announced measures for development of corporate bond market An active derivatives market can facilitate efficient management of credit risks improve liquidity and efficiency in the corporate bond market and facilitate issuance of corporate bonds across the rating spectrum the RBI said An announcement was made in the Union Budget speech delivered on February 1 2026 that total return swaps on corporate bonds and derivatives on corporate bond indices will be introducedAccordingly a regulatory framework to enable the introduction of derivatives on credit indices and total return swaps on corporate bonds will be issued shortly for public feedback the central bank said It also proposed to issue draft revised guidelines for Authorised Dealer banks and standalone primary dealers SPDs allowing them more flexibility in undertaking foreign exchange transactionsBanks and standalone primary dealers authorised under FEMA 1999 access the foreign exchange market for market making balance sheet management and hedging of risksThe regulatory framework governing the facilities for such Authorised Dealers ADs has been reviewed rationalised and refined in view of the current market practices and requirements domestically and globallyThe RBI said the revised framework provides these Authorised Dealers with greater flexibility with respect to foreign exchange products risk management and platforms Draft directions in this regard will be issued shortly for public consultation The RBI has also proposed to remove the limit of Rs 25 lakh crore for investments under the Voluntary Retention Route VRR Investment through the VRR in each category of securities will be subject to the investment ceiling for the respective category under the General Route it addedThis story has been sourced from a third party syndicated feed agencies Midday accepts no responsibility or liability for its dependability trustworthiness reliability and data of the text Midday managementmiddaycom reserves the sole right to alter delete or remove without notice the content in its absolute discretion for any reason whatsoever