Reserve Bank of India (Commercial Banks – Credit Facilities) Third Amendment Directions, 2026

The Reserve Bank of India issued the RBI (Commercial Banks – Credit Facilities) Third Amendment Directions, 2026, on June 10, 2026, permitting scheduled comm...

What Happened

The Reserve Bank of India issued the RBI (Commercial Banks – Credit Facilities) Third Amendment Directions, 2026, on June 10, 2026, permitting scheduled commercial banks to extend credit facilities to Real Estate Investment Trusts (REITs) registered with SEBI for the first time.
The directions also update existing provisions governing bank lending to Infrastructure Investment Trusts (InvITs), adding new safeguards and lending conditions.
The directions are issued under Sections 21 and 35A of the Banking Regulation Act, 1949, and come into force on October 1, 2026 (or earlier, if a bank voluntarily adopts the full framework).
For REITs, key conditions include: the REIT must be SEBI-registered and listed; at least 80% of its underlying assets must have generated positive cash flows for at least one year; aggregate bank exposure is capped at 49% of REIT asset value; and no bullet or ballooning repayment structures are permitted.
For InvITs, the updated framework requires at least 80% of InvIT asset value to be in completed, revenue-generating infrastructure projects; aggregate exposure is capped at 49% of InvIT asset value; and overall leverage must remain within SEBI's prescribed ceiling.
Existing non-compliant loans may run off until maturity but cannot be renewed or enhanced without compliance with the new framework.

Static Topic Bridges

Real Estate Investment Trusts (REITs) — Structure and SEBI Regulation

A Real Estate Investment Trust (REIT) is a pooled investment vehicle that owns and manages income-generating real estate assets. REITs enable retail and institutional investors to participate in real estate ownership without direct property purchase. In India, SEBI introduced the REIT regulatory framework in 2014 through the SEBI (Real Estate Investment Trusts) Regulations. REITs are required to be listed on recognised stock exchanges, and at least 80% of their assets must be in completed, rent-generating properties. REITs distribute at least 90% of their net distributable cash flows to unit-holders. The income to REITs is primarily rental income from commercial real estate (office parks, malls, warehouses). REITs have emerged as an important instrument for monetising commercial real estate and channelling long-term capital into the sector.

Regulated by SEBI under SEBI (Real Estate Investment Trusts) Regulations, 2014 (as amended)
Must be listed on recognised stock exchanges
Minimum 80% assets in completed, income-generating properties
Mandatory distribution: minimum 90% of net distributable cash flows
Trust structure: Sponsor, Trustee, Manager, and Special Purpose Vehicles (SPVs) holding properties
SEBI (REIT) Amendment Regulations, 2025 introduced further governance and accessibility reforms

Connection to this news: By permitting bank lending to SEBI-registered listed REITs, the RBI is expanding the financing ecosystem for the commercial real estate sector, potentially lowering the cost of capital for REITs and improving their ability to acquire and develop properties.

Infrastructure Investment Trusts (InvITs) — Structure and Financing Role

An Infrastructure Investment Trust (InvIT) is a collective investment scheme that pools investor funds to invest in infrastructure assets such as roads, highways, power transmission lines, gas pipelines, renewable energy projects, and telecom towers. InvITs are regulated by SEBI under the SEBI (Infrastructure Investment Trusts) Regulations, 2014. Like REITs, InvITs are listed on stock exchanges and are required to distribute a minimum portion of cash flows to unit-holders. InvITs have become a significant instrument for infrastructure asset monetisation, allowing developers to recycle capital by selling operational assets into InvIT structures while retaining management control.

Regulated by SEBI under SEBI (Infrastructure Investment Trusts) Regulations, 2014 (as amended)
Must be listed on recognised stock exchanges
At least 80% of assets must be in completed, revenue-generating infrastructure projects (under new RBI framework)
National Infrastructure Pipeline (NIP) and National Monetisation Pipeline (NMP) identify InvITs as key vehicles for asset monetisation
SEBI (InvIT) Amendment Regulations, 2025 came into effect April 1, 2025

Connection to this news: The updated RBI directions tighten the safeguards for bank lending to InvITs — specifically requiring 80% completion and revenue-generation thresholds and capping aggregate bank exposure at 49% of InvIT asset value — balancing capital access with prudential risk management.

Banking Regulation Act 1949 — Sections 21 and 35A

The Banking Regulation Act, 1949 is the primary legislation governing commercial banking in India. Section 21 empowers the RBI to determine the policy in relation to advances made by banks — this covers credit policy directives including which sectors banks can lend to, exposure limits, interest rate frameworks, and loan conditions. Section 35A empowers the RBI to issue directions to banking companies to secure their proper management. Directions issued under Section 35A are binding on all scheduled commercial banks and are used to implement regulatory policy changes including lending norms, asset classification standards, and exposure limits. Together, Sections 21 and 35A form the principal legal basis for RBI's prudential lending directives.

Section 21: RBI's power to determine credit policy and advance-related directives
Section 35A: RBI's power to issue binding directions for proper bank management
Banking Regulation Act, 1949: enacted March 10, 1949 (Act No. 10 of 1949)
RBI also has inspection and scrutiny powers under Section 35 of the same Act
Directions under these sections are distinct from guidelines (which are advisory); directions are mandatory

Connection to this news: The Third Amendment Directions, 2026 are issued under the combined authority of Sections 21 and 35A, giving them binding force on all scheduled commercial banks from October 1, 2026. Banks must restructure any non-compliant REIT/InvIT loans at renewal.

Infrastructure Financing Gap and Capital Channelling

India faces a significant infrastructure financing gap, with the National Infrastructure Pipeline (NIP) targeting Rs 111 lakh crore in infrastructure investment over 2020–25. Bridging this gap requires mobilisation of long-term private capital alongside public spending. REITs and InvITs serve as capital-recycling mechanisms — developers build and operate assets, then transfer them to trusts, freeing balance sheet capital for new projects. Bank lending to these trusts, within prudential safeguards, is one important channel for providing long-term debt to mature operational assets.

National Infrastructure Pipeline (NIP): Rs 111 lakh crore, 2020–25
National Monetisation Pipeline (NMP): Rs 6 lakh crore target from brownfield asset monetisation
Bank credit to REITs/InvITs is subject to 49% aggregate exposure cap (new framework)
No bullet/ballooning repayments permitted — amortising structure required for bank loans

Connection to this news: Permitting bank credit to SEBI-registered REITs opens a new, regulated channel of long-term debt for India's commercial real estate sector, while the prudential guardrails (49% cap, no bullet repayments, positive cash flow requirement) ensure this does not create systemic risk.

Key Facts & Data

Directions issued: RBI (Commercial Banks – Credit Facilities) Third Amendment Directions, 2026
Effective date: October 1, 2026 (or earlier by individual bank adoption)
Legal authority: Sections 21 and 35A, Banking Regulation Act, 1949
REIT eligibility: SEBI-registered, listed; 80%+ underlying assets with positive cashflows for 1+ year
InvIT eligibility: SEBI-registered, listed; 80%+ assets in completed revenue-generating infrastructure
Aggregate bank exposure cap: 49% of REIT/InvIT asset value
Repayment restriction: No bullet or ballooning structures for bank loans to REITs/InvITs
SEBI introduced REIT and InvIT frameworks in 2014
SEBI (REIT) Amendment Regulations, 2025: effective April 22, 2025
SEBI (InvIT) Amendment Regulations, 2025: effective April 1, 2025