The RBI has permitted banks to invest up to 10 per cent of the unit capital of an Real Estate Investment Trust (REITs) or Infrastructure Investment Trusts (InvITs). The banks' exposure to REITs/InvITs will be within the overall ceiling of 20 per cent of the net worth permitted for direct investments in shares, convertible bonds/ debentures, units of equity-oriented mutual funds and Venture Capital Funds (VCFs).
"Banks should put in place a Board approved policy on exposures to REITs/ InvITs which lays down an internal limit on such investments within the overall exposure limits in respect of the real estate sector and infrastructure sector," the Reserve Bank said while issuing prudential guidelines in this regard. It further said banks will not invest more than 10 per cent of the unit capital of an REIT/ InvIT.
In addition, banks will have to ensure adherence to the prudential guidelines on equity investments, classification and valuation of investment portfolio, Basel III Capital requirements for commercial real estate exposures and large exposure framework. In its first bimonthly monetary policy of 2017-18, the RBI had permitted banks to invest in REITs and InvITs.
The move was aimed to help revive the cash-starved infrastructure sector. The Securities and Exchange Board of India (Sebi) has put in place regulations for REITs and InvITs and requested the RBI to allow banks to participate in these schemes.