Mumbai, February 6: The Reserve Bank of India (RBI) Governor Sanjay Malhotra announced on Friday that the central bank has proposed to allow commercial banks to extend Loans to Real Estate Investment Trusts (REITs), contingent upon prudent safety measures.
Malhotra stated that this initiative is being undertaken due to the establishment of a robust regulatory and governance framework for listed REITs.
The introduction of REITs and Infrastructure Investment Trusts (InvITs) in India aims to free up bank capital for completed or operational real estate and infrastructure projects, with funding for these projects coming from institutional or retail investors.
Previously, banks were kept away from funding REITs, although over time, Banking funding for InvITs was permitted.
The RBI indicated that after reviewing 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 safety measures.
Malhotra remarked, “The existing guidelines for lending to InvITs are being aligned with the proposed prudent safety measures for lending to REITs. A draft in this regard will soon be released for public consultation.”
He also announced that the RBI is proposing to eliminate the requirement for prior approval from the central bank for non-banking financial companies (NBFCs) that provide 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.