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Credit Facilities – Lending to REITs and InvITs and Acquisition Finance

Reserve Bank of India (RBI) has issued directions on credit facilities offered by various regulated entities. This article summarises the directions applicable to lending to Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs) and acquisition finance.

To whom are the directions applicable?

The directions are applicable to the following Regulated Entities (REs) –

  • Commercial Banks 
  • Small Finance Banks (SFBs)
  • All India Financial Institutions (AIFIs) regulated by RBI –
    • Export Import Bank of India (EXIM Bank)
    • National Bank for Agriculture and Rural Development (NABARD)
    • National Housing Bank (NHB)
    • Small Industries Development Bank of India (SIDBI)
    • National Bank for Financing Infrastructure and Development (NaBFID)

What are the directions on lending to REITs and InvITs?

Lending to REITs (by commercial banks) Lending to InvITs (by commercial banks, SFBs and AIFIs)
Banks shall be permitted to lend to REITs which are registered with and regulated by Securities and Exchange Board of India (SEBI). Banks / AIFIs shall be permitted to lend to InvITs which are registered with and regulated by SEBI.
Lending to REITs undertaken by overseas branches of Indian banks as part of syndication arrangements, shall not be subject to the directions domestically applicable, if the funding contribution of a bank under such a syndication arrangement for a particular deal, across all its overseas branches does not exceed 20% of total funding under the deal. However, the banks shall ensure that the REIT being funded is registered with and regulated by a financial sector regulator in the relevant jurisdiction and is listed. -
A bank may lend to a REIT only if –
  • The REIT is listed.
  • The REIT has at least 80% of its underlying assets generating positive cashflows from operations for at least 1 year.
 A bank / AIFI may lend to an InvIT only if –
  • The InvIT is listed.
  • Not less than 80% of the value of the InvIT assets is invested in completed and revenue generating infrastructure projects and such assets have been generating net positive cashflows from operations for at least 1 year.
The bank shall ensure that lending to a REIT is not used to fund its Special Purpose Vehicles (SPVs) having existing loans from REs and which are facing financial difficulty. The bank / AIFI shall ensure that lending to an InvIT is not used to fund its SPVs having existing loans from REs and which are facing financial difficulty.
If the purpose of bank financing is refinancing of existing credit facilities of SPVs, then such refinancing shall be undertaken only in respect of credit facilities towards completed projects that have received a Completion Certificate (CC), Occupancy Certificate (OC), or their equivalent. If the purpose of bank / AIFI financing is refinancing of existing credit facilities of SPVs, then such refinancing shall be undertaken only in respect of credit facilities towards completed projects that have achieved commencement of commercial operations.
The credit facilities extended by a bank to a REIT shall not involve bullet or ballooning repayment structures. However, this shall not preclude structuring the repayment schedule in line with projected cash flows. The credit facilities extended by a bank / AIFI to an InvIT shall not involve bullet or ballooning repayment structures. However, this shall not preclude structuring the repayment schedule in line with projected cash flows.
The aggregate exposure of all banks to a borrowing REIT, together with its underlying SPVs / holding companies, shall not exceed 49% of the value of the REIT’s assets. Exposure for the purpose shall include outstanding fund-based credit facilities, including investments in the form of bonds, debentures, and commercial paper, and credit equivalent of non-fund-based facilities, extended by banks to a REIT. The aggregate exposure of all banks to a borrowing InvIT, together with its underlying SPVs / holding companies, shall not exceed 49% of the value of the InvIT’s assets. Exposure for the purpose shall include outstanding fund-based credit facilities, including investments in the form of bonds, debentures, and commercial paper, and credit equivalent of non-fund-based facilities, extended by banks to an InvIT.
No such limit is applicable to AIFIs.
Bank financing to a REIT shall be fully secured inter alia by charge over the underlying immovable property, an assignment of rental cash flows and receivables, a pledge of equity interests held by the REIT in the relevant SPV, and / or such other legally enforceable security interests as may be applicable. Bank / AIFI financing to an InvIT shall be fully secured inter alia by charge over the underlying immovable property, an assignment of cash flows and receivables, a pledge of equity interests held by the InvIT in the relevant SPV, and / or such other legally enforceable security interests as may be applicable.

What are the directions on Acquisition Finance?

Commercial Banks AIFIs
Acquisition finance may be extended by a bank to an Indian non-financial company to acquire ‘control’, or to increase its stake towards acquiring ‘control’, over a domestic or foreign non-financial target company as strategic investment – i.e., an investment driven by the core objective of creating long-term value for the acquirer through potential synergies, rather than mere financial restructuring for short-term gains. Acquisition finance may be extended by an AIFI to an acquiring company, having infrastructure financing as its mandate to acquire ‘control’, or to increase its stake towards acquiring ‘control’ over a non-financial infrastructure company as strategic investment – i.e., an investment driven by the core objective of creating long-term value for the acquirer through potential synergies, rather than mere financial restructuring for short-term gains.
Acquisition finance may also be provided to refinance existing acquisition debt of an acquiring company.
Acquisition finance can be extended to –
(a) The acquiring company for acquisition of a target company directly by it.
(b) The acquiring company, for on-lending to a non-financial subsidiary incorporated in India or overseas for acquisition of a target company by such a subsidiary.
(c) An existing non-financial subsidiary of the acquiring company incorporated in India or overseas, on the strength of the acquiring company.
(d) A step-down SPV set up by the acquiring company singly or jointly with another non-financial company, in India or overseas specifically for the purpose, provided that the SPV has no business purpose other than the acquisition and holding of the target. 		Acquisition finance can be extended to –
(a) The acquiring company (i.e. InvIT) for acquisition of a target company (i.e. non-financial infrastructure company) directly by it.
(b) The acquiring company, for on-lending to a holding company, or a non-financial SPV for acquisition of a target company by such a holding company or SPV.
The acquiring company (or, where acquisition is through an SPV or subsidiary, the acquiring company controlling such SPV or subsidiary) shall meet the following financial criteria at the time of sanctioning the acquisition finance –
(i) If listed on a recognized stock exchange in India – (a) Minimum net worth of ₹500 crore; and (b) Net profit after taxes reported in each of the previous 3 consecutive financial years.
(ii) If unlisted – (a) Minimum net worth of ₹500 crore; (b) Net profit after taxes reported in each of the previous 3 consecutive financial years, and (c) an investment grade rating (BBB- or above) from a credit rating agency. 		The acquiring company shall have a standalone as well as consolidated minimum net worth of ₹500 crore.
Total financing shall not exceed 75% of the acquisition value.
Control may be established through a single transaction, or a series of inter-connected transactions but completed within 12 months from the date of first disbursal of the acquisition finance.
Where the acquiring company already holds control over the target company prior to seeking acquisition finance, acquisition finance may be extended only for acquiring additional stake that crosses a substantial threshold of 26%, 51%, 75%, 90% of voting rights.
Acquisition finance shall be secured by the financial instruments issued by the target company through which control over it is acquired by the acquiring company.
The acquiring company and the target company shall not be related parties, except for financing acquisition of additional stake. -
Post-acquisition, debt-to-equity ratio at the acquiring company’s consolidated balance sheet level shall not exceed 3:1 on a continuous basis. -
The following exemptions are applicable in the case of bank finance to a REIT / InvIT for acquiring a stake in other entities, including SPVs / holding companies –
  • REIT / InvITs shall be exempted from the requirement that the acquiring entity shall be a non-financial company.
  • The requirement pertaining to net profit after tax reported in each of the previous 3 consecutive financial years shall not be applicable in respect of acquisition finance extended by banks to REIT / InvITs.

 


References

Reserve Bank of India. (2025, November 28). 'Reserve Bank of India (All India Financial Institutions – Credit Facilities) Directions, 2025 (updated as on April 1, 2026)'. Retrieved from https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12981&Mode=0

Reserve Bank of India. (2025, November 28). 'Reserve Bank of India (Commercial Banks – Credit Facilities) Directions, 2025 (Updated as on April 01, 2026)'. Retrieved from https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=13156&Mode=0

Reserve Bank of India. (2025, November 28). 'Reserve Bank of India (Small Finance Banks – Credit Facilities) Directions, 2025 (Updated as on April 01, 2026)'. Retrieved from https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=13124&Mode=0

Reserve Bank of India. (2026, June 10). 'Reserve Bank of India (All India Financial Institutions – Credit Facilities) Amendment Directions, 2026'. Retrieved from https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=13482&Mode=0

Reserve Bank of India. (2026, March 30). 'Reserve Bank of India (Commercial Banks – Credit Facilities) Amendment Directions, 2026 (Revised)'. Retrieved from https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=13346&Mode=0

Reserve Bank of India. (2026, June 10). 'Reserve Bank of India (Commercial Banks – Credit Facilities) Third Amendment Directions, 2026'. Retrieved from https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=13478&Mode=0

Reserve Bank of India. (2026, June 10). 'Reserve Bank of India (Small Finance Banks – Credit Facilities) Second Amendment Directions, 2026'. Retrieved from https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=13481&Mode=0


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