Mumbai, Feb 6 Reserve Bank Governor Sanjay Malhotra announced on Friday that the Central Bank proposes to permit commercial banks to extend finance to Real Estate Investment Trusts (REITs), subject to appropriate prudential safeguards.
He said that the step is being taken as there is a strong regulatory and governance framework for listed REITs now.
REITs and Infrastructure Investment Trusts (InvITs) were conceptualised in India with a view to free up banks’ funds in completed and operational real estate and infrastructure projects by refinancing such exposures with pooled funds of institutional as well as retail investors. Consistent with these objectives, commercial banks were not permitted to lend to these entities.
While bank lending to InvITs was allowed subsequently, lending to REITs was not permitted hitherto. Upon review and considering the presence of strong regulatory and governance framework for listed REITs, it is proposed to permit commercial banks to extend finance to REITs, subject to appropriate prudential safeguards.
"The existing guidelines in respect of lending to InvITs are also being harmonised for parity with prudential safeguards proposed for lending to REITs. Draft directions in this regard will be issued shortly for public consultation," Malhotra said.
He also announced that the RBI proposes to dispense with the requirement of prior approval for opening branches in the case of NBFCs-Investment and Credit Companies (ICCs) engaged in the business of lending against gold collateral. Currently, such NBFCs with over 1,000 branches are required to obtain prior RBI approval for opening new branches.
"In view of the comprehensive prudential and governance framework applicable to NBFC-ICCs, it is proposed to dispense with the requirement of prior approval for opening branches by such NBFCs. The draft instructions in this regard will be issued shortly seeking stakeholders’ comments," the RBI Governor explained.
The RBI also proposes measures aimed at improving the lending capacity and governance of urban co-operative banks.
In the recent past, several regulatory measures have been undertaken with the objective of providing greater flexibility to urban cooperative banks (UCBs) in their lending operations. It is now proposed to rationalise the extant regulatory norms applicable for unsecured loans by UCBs; limits for lending to nominal members; and the tenor and moratorium requirements for housing loans.
The proposed review will adopt a tiered and simplified approach while maintaining prudential discipline, taking into consideration the growth in total loans and advances of the UCBs over the past few years. Draft directions in this regard will be issued shortly for public consultation, the RBI Governor said.
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