Mumbai, February 6: The Governor of the Reserve Bank of India, Sanjay Malhotra, announced on Friday that the central bank has proposed allowing commercial banks to extend loans to real estate investment Trusts (REITs). However, this proposal is subject to prudent security measures.
Malhotra stated that this initiative is being taken because a robust regulatory and governance framework now exists for listed REITs.
REITs and Infrastructure Investment Trusts (InvITs) in India are designed to free up bank capital for completed or operational real estate and infrastructure projects. Funding for these projects comes from institutional or retail investors in REITs and InvITs.
Previously, banks were kept away from funding REITs. Over time, however, banking funding was permitted for InvITs, while REITs remained excluded.
The RBI noted that after reviewing the situation and considering the presence of a strong regulatory and governance framework for listed REITs, it has proposed allowing commercial banks to fund REITs, subject to appropriate prudent security measures.
Malhotra mentioned, “The existing guidelines for lending to InvITs are being aligned with the proposed prudent security measures for lending to REITs. A draft regarding this will be released soon for public consultation.”
He also announced that the RBI is proposing to eliminate the need for prior approval for non-banking financial companies (NBFCs) that offer loans against gold to open branches. Currently, NBFCs with over 1,000 branches must obtain prior approval from the RBI to open new branches.
Additionally, the RBI has proposed measures aimed at enhancing the lending capacity and operations of urban cooperative banks.