Mumbai, February 6 – In a significant policy shift, Reserve Bank of India Governor Sanjay Malhotra announced on Friday that commercial banks will soon be permitted to extend loans to Real Estate Investment Trusts (REITs). This move comes with stringent prudential safeguards to ensure financial stability.
The decision reflects the maturation of India’s REIT market, now bolstered by robust regulatory oversight and governance frameworks for listed REITs. ‘We have reviewed the strong regulatory and governance structure in place for listed REITs,’ Malhotra stated, emphasizing the careful deliberation behind the proposal.
REITs and Infrastructure Investment Trusts (InvITs) were introduced in India to unlock bank capital tied up in completed real estate and infrastructure projects. These vehicles allow institutional and retail investors to fund such assets, freeing banks from direct exposure. While banks were previously barred from funding REITs—unlike InvITs where lending was gradually permitted—the RBI now sees sufficient safeguards to extend similar facilities.
‘Draft guidelines aligning with existing InvIT lending norms will be released soon for public consultation,’ the governor added. This harmonization aims to create a level playing field while mitigating risks.
In parallel announcements, the RBI proposed easing branch expansion norms for non-banking financial companies (NBFCs) offering gold loans. Investment and credit companies (ICCs) with over 1,000 branches will no longer need prior RBI approval for new outlets, streamlining operations.
Additionally, measures to enhance urban cooperative banks’ lending capacity and operational efficiency were outlined, signaling a broader push towards a more dynamic financial sector.
This suite of reforms underscores the RBI’s commitment to fostering growth in real estate and infrastructure financing without compromising on systemic resilience. Market participants welcome the changes, anticipating increased liquidity and investment in the sector.