Mumbai, 6 February (IANS). Reserve Bank of India Governor Sanjay Malhotra announced on Friday that the central bank has proposed to allow commercial banks to give loans to real estate investment trusts (REITs). However, this is subject to prudent security measures.
He said the step is being taken as a strong regulatory and governance framework now exists for listed REITs.
In India, REITs and Infrastructure Investment Trusts (InvITs) have been introduced to free up banks’ capital in completed or operational real estate and infrastructure projects. In this, projects in REITs and InvITs are funded by institutional or retail investors.
For this reason, till now banks were kept away from funding REITs.
However, with time, banking funding was allowed in InvITs, but REITs were kept out of it.
RBI said that after reviewing and considering the presence of strong regulatory and governance framework for listed REITs, it is proposed to allow commercial banks to fund REITs, subject to appropriate prudential safeguards.
“The existing guidelines on lending to InvITs are being aligned with the prudential safeguards proposed for lending to REITs. Drafts in this regard will soon be released for public consultation,” Malhotra said.
He also announced that the RBI is proposing to do away with the requirement of prior approval for opening branches in the case of non-government financial institutions (NBFCs) – investment and credit companies (ICCs) – that offer loans against gold. At present, such NBCs with more than 1,000 branches are required to obtain prior approval from the RBI for opening new branches.
The RBI has also proposed measures aimed at improving the lending capacity and operations of urban co-operative banks.
–IANS
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