RBI/2025-26/<>
DOR.CRE.REC. /07.01.002/2025-26

DD-MM-YYYY

Reserve Bank of India (Small Finance Banks – Credit Facilities) Second
Amendment Directions, 2026 – Draft for Comments

Please refer to the Reserve Bank of India (Small Finance Banks – Credit Facilities) Directions, 2025 (hereinafter referred to as ‘Directions’).

2. On a review, and in exercise of the powers conferred by Sections 21 and 35A of the Banking Regulation Act, 1949 and all other provisions / laws enabling the Reserve Bank of India in this regard, the Reserve Bank of India, being satisfied that it is necessary and expedient in public interest so to do, hereby, issues the Second Amendment Directions hereinafter specified.

3. The Second Amendment Directions modify the Directions as under:

3(1) In ‘Chapter IX – Infrastructure Financing’ of the Directions, paragraph 137A shall be substituted with the following paragraph, namely:

“137A. Lending to InvITs

(1) Banks shall be permitted to lend to InvITs which are registered with and regulated by SEBI.

(2) As InvITs are trusts, the bank shall be mindful of the legal provisions in respect of these entities especially those regarding enforcement of security. Specifically, the bank shall establish that the borrowing by the trustee is well within the powers allowed under the respective trust deed.

(3) A bank shall strictly monitor the end use of funds lent to InvITs to ensure that this route is not being used to finance activities which are not permitted, such as land acquisition, even where such acquisition forms part of a project.

(4) General Conditions:

(i) A bank shall put in place a Board approved policy on lending to InvITs, which shall, inter alia, cover appraisal mechanism, sanctioning conditions, underwriting norms, including metrics such as the debt service coverage ratio (DSCR) and their corresponding benchmark levels, internal limits for individual exposures as well as the aggregate portfolio, and monitoring mechanisms, including stipulation of appropriate covenants.

(ii) A bank shall lend to only those InvITs where none of the underlying SPVs is facing ‘financial difficulty’ as defined in the Reserve Bank of India (Small Finance Banks – Resolution of Stressed Assets) Directions, 2025.

(iii) Bank finance to InvITs for acquiring equity of other entities shall be subject to the relevant conditions given in Paragraph 137.

(iv) Lending to an InvIT by a bank shall only be by way of loans not involving bullet or ballooning principal repayments.

(v) A bank may lend only to an InvIT which satisfies the following conditions:

a) InvIT is listed;

b) InvIT has completed minimum three years of operations, with a positive ‘net distributable cash flows’ in the preceding two financial years.

c) InvIT should not have been subject to any material adverse regulatory action during the previous three years.

(5) Prudential Ceiling on Leverage:

(i) Without prejudice to generality, a bank shall undertake assessment of all critical parameters including sufficiency of cash flows at InvIT level to ensure timely debt servicing.

(ii) Overall leverage of the borrowing InvIT shall be within the prudential ceiling prescribed by SEBI, or such lower limit as may be decided by the bank’s Board.

(iii) The aggregate credit exposure of all banks to the borrowing InvIT and its underlying SPVs/ holdcos taken together, shall not exceed 49% of the value of the InvIT assets, or such lower limit as may be decided by a bank’s Board based on the credit rating of the InvIT or otherwise.

(6) Security Coverage

(i) Bank finance to InvITs shall be fully secured by way of a charge on identified assets. The financing against a specified asset across all banks and AIFIs shall be extended either at the InvIT level or at the SPV/holdco level, but not at both levels. Where a facility is extended at the InvIT level against a specified asset, any existing loan at the SPV or holding company level in respect of such asset shall be fully liquidated.

(ii) The bank shall also create a charge over receivables from the underlying assets and / or establish an escrow mechanism to prevent diversion of cash flows.”

4. These Directions shall come into force from July 1, 2026, or an earlier date when adopted by a bank in entirety.

(Vaibhav Chaturvedi)
Chief General Manager