Mumbai, Feb 6 (PTI) The Reserve Bank of India on Friday proposed to allow banks to lend to Real Estate Investment Trusts (REITs) with certain prudential safeguards to deepen the financing pool for the real estate sector. REITs are investment vehicles that own or operate income-generating real estate, enabling investors to earn a share of the income produced without directly purchasing properties.

REITs and Infrastructure Investment Trusts (InvITs) were conceptualised in India to free up banks’ funds in completed and operational real estate and infrastructure projects by refinancing such exposures with pooled funds of institutions and retail investors.

Consistent with these objectives, commercial banks were not permitted, ab initio, to lend to these entities, the Reserve Bank said. While bank lending to InvITs was allowed subsequently, lending to REITs was not permitted.

"To further promote financing to the real estate sector, it is proposed to allow banks to lend to REITs with certain prudential safeguards," RBI Governor Sanjay Malhotra said while unveiling the bi-monthly monetary policy.

RBI's 'Statement on Developmental and Regulatory Policies' said it is proposed to permit commercial banks to extend finance to REITs after review and considering the presence of a strong regulatory and governance framework for listed REITs.

The existing guidelines in respect of lending to InvITs are also being harmonised for parity with prudential safeguards proposed for lending to REITs, it added.

At present, there are five listed REITs in India - Brookfield India Real Estate Trust, Embassy Office Parks REIT, Mindspace Business Parks REIT, Nexus Select Trust, and Knowledge Realty Trust.

Draft directions will be issued shortly for public consultation, the central bank said.

In the Union Budget, Finance Minister Nirmala Sitharaman had proposed to accelerate "recycling" of real estate assets owned by Central Public Sector Enterprises (CPSEs) through the setting up of dedicated REITs.

The RBI also announced measures for development of corporate bond market.

An active derivatives market can facilitate efficient management of credit risks, improve liquidity and efficiency in the corporate bond market and facilitate issuance of corporate bonds across the rating spectrum, the RBI said.

An announcement was made in the Union Budget speech, delivered on February 1, 2026, that total return swaps on corporate bonds and derivatives on corporate bond indices will be introduced.

Accordingly, a regulatory framework to enable the introduction of derivatives on credit indices and total return swaps on corporate bonds will be issued shortly for public feedback, the central bank said.

It also proposed to issue draft revised guidelines for Authorised Dealer banks and stand-alone primary dealers (SPDs), allowing them more flexibility in undertaking foreign exchange transactions.

Banks and standalone primary dealers authorised under FEMA, 1999, access the foreign exchange market for market making, balance sheet management and hedging of risks.

The regulatory framework governing the facilities for such Authorised Dealers (ADs) has been reviewed, rationalised and refined in view of the current market practices and requirements, domestically and globally.

The RBI said the revised framework provides these Authorised Dealers with greater flexibility with respect to foreign exchange products, risk management and platforms. Draft directions in this regard will be issued shortly for public consultation.

The RBI has also proposed to remove the limit of Rs 2.5 lakh crore for investments under the Voluntary Retention Route (VRR).

Investment through the VRR in each category of securities will be subject to the investment ceiling for the respective category under the General Route, it added. PTI NKD CS NKD CS BAL

Banks lending to REITs proposed with prudential safeguards; draft rules and related market reforms to follow. The Reserve Bank proposes permitting commercial banks to lend to REITs subject to prudential safeguards and a review of regulatory and governance frameworks, harmonising InvIT lending guidelines for parity, and issuing draft directions for public consultation; it also proposed a regulatory framework for derivatives on credit indices and total return swaps on corporate bonds, revised flexibility for Authorised Dealers and primary dealers in foreign exchange, and removal of the stated cap on Voluntary Retention Route investments subject to General Route ceilings.