Reserve Bank Governor Sanjay Malhotra announced that commercial banks will soon be allowed to provide financial support to Real Estate Investment Trusts (REITs) with necessary safeguards in place. This move comes as a response to the robust regulatory and governance structure now in place for listed REITs. The aim is to enable banks to release funds tied up in completed real estate and infrastructure projects by refinancing them through pooled funds from various investors.
While lending to Infrastructure Investment Trusts (InvITs) was permitted earlier, lending to REITs was not allowed until now. However, considering the strengthened regulatory and governance framework for listed REITs, the RBI is proposing to permit commercial banks to extend finance to REITs, subject to appropriate prudential measures. Additionally, the RBI plans to streamline guidelines for lending to InvITs to align them with the safeguards proposed for REITs.
Governor Malhotra also revealed plans to eliminate the requirement for prior approval for NBFCs-Investment and Credit Companies (ICCs) dealing with gold collateral to open new branches. Currently, NBFCs with more than 1,000 branches need RBI approval for branch expansion. The proposal aims to remove this approval requirement for NBFCs due to the comprehensive prudential and governance framework they operate under. Draft instructions will be issued for public feedback on this matter.
Furthermore, the RBI intends to enhance the lending capacity and governance of urban co-operative banks by revising regulatory norms related to unsecured loans, lending limits, and housing loan tenor and moratorium requirements. These changes are part of ongoing efforts to provide urban cooperative banks with more flexibility in their lending activities while ensuring prudential discipline. Draft directions will be released for public consultation to gather stakeholders’ opinions on these proposed adjustments.
