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    Reserve Bank of India: Lending by Banks To Invits

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    Jayanth Ram
    The Reserve Bank of India issued guidelines allowing banks to provide lending to Infrastructure Investment Trusts (InvITs). Key points: 1) Banks must have a board-approved policy covering appraisal, sanctioning, limits, monitoring of exposures to InvITs. 2) Banks must assess InvIT cash flows and overall leverage to ensure debt can be repaid. Banks must also monitor performance of underlying projects, as InvITs' ability to repay depends on project performance. 3) Banks can only lend to InvITs where underlying projects are not facing "financial difficulty" as defined in other RBI guidelines. 4) Bank lending to InvITs for acquiring other entities must follow existing

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    Reserve Bank of India: Lending by Banks To Invits

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    Jayanth Ram
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    The Reserve Bank of India issued guidelines allowing banks to provide lending to Infrastructure Investment Trusts (InvITs). Key points: 1) Banks must have a board-approved policy covering appraisal, sanctioning, limits, monitoring of exposures to InvITs. 2) Banks must assess InvIT cash flows and overall leverage to ensure debt can be repaid. Banks must also monitor performance of underlying projects, as InvITs' ability to repay depends on project performance. 3) Banks can only lend to InvITs where underlying projects are not facing "financial difficulty" as defined in other RBI guidelines. 4) Bank lending to InvITs for acquiring other entities must follow existing

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    The Reserve Bank of India issued guidelines allowing banks to provide lending to Infrastructure Investment Trusts (InvITs). Key points: 1) Banks must have a board-approved policy covering appraisal, sanctioning, limits, monitoring of exposures to InvITs. 2) Banks must assess InvIT cash flows and overall leverage to ensure debt can be repaid. Banks must also monitor performance of underlying projects, as InvITs' ability to repay depends on project performance. 3) Banks can only lend to InvITs where underlying projects are not facing "financial difficulty" as defined in other RBI guidelines. 4) Bank lending to InvITs for acquiring other entities must follow existing

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    7 views2 pages

    Reserve Bank of India: Lending by Banks To Invits

    Uploaded by

    Jayanth Ram
    The Reserve Bank of India issued guidelines allowing banks to provide lending to Infrastructure Investment Trusts (InvITs). Key points: 1) Banks must have a board-approved policy covering appraisal, sanctioning, limits, monitoring of exposures to InvITs. 2) Banks must assess InvIT cash flows and overall leverage to ensure debt can be repaid. Banks must also monitor performance of underlying projects, as InvITs' ability to repay depends on project performance. 3) Banks can only lend to InvITs where underlying projects are not facing "financial difficulty" as defined in other RBI guidelines. 4) Bank lending to InvITs for acquiring other entities must follow existing

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    of 2

    भारतीय �रज़वर् ब�क

    RESERVE BANK OF INDIA


    www.rbi.org.in

    RBI/2019-20/83
    DBR.No.BP.BC.20/08.12.014/2019-20 October 14, 2019

    All Scheduled Commercial Banks


    (Excluding Regional Rural Banks (RRBs)),
    All-India Financial Institutions (Exim Bank, NABARD, NHB and SIDBI)

    Dear Sir/Madam,

    Lending by banks to InvITs

    Please refer to the circular DBR.No.FSD.BC.62/24.01.040/2016-17 dated April 18,


    2017 on ‘Banks' Investment in Units of InvITs’ in terms of which banks are allowed
    to invest in units of InvITs subject to the specified conditions.

    2. Banks and other stakeholders have been seeking clarity on provision of credit
    facilities to InvITs. The matter has been examined and it has been decided that
    banks may be permitted to lend to InvITs subject to the following conditions:

    i) Banks shall put in place a Board approved policy on exposures to InvITs which
    shall inter alia cover the appraisal mechanism, sanctioning conditions, internal
    limits, monitoring mechanism, etc.

    ii) Without prejudice to generality, banks shall undertake assessment of all critical
    parameters including sufficiency of cash flows at InvIT level to ensure timely debt
    servicing. The overall leverage of the InvITs and the underlying SPVs put together
    shall be within the permissible leverage as per the Board approved policy of the
    banks. Banks shall also monitor performance of the underlying SPVs on an
    ongoing basis as ability of the InvITs to meet their debt obligation will largely
    depend on the performance of these SPVs. As InvITs are trusts, banks should
    keep in mind the legal provisions in respect of these entities especially those
    regarding enforcement of security.
    iii) Banks shall lend to only those InvITs where none of the underlying SPVs, which
    have existing bank loans, is facing ‘financial difficulty’ as defined in para 2 of
    Annex-I to the circular DBR.No.BP.BC.45/21.04.048/2018-19 dated June 07,
    2019.

    iv) Bank finance to InvITs for acquiring equity of other entities shall be subject to
    the conditions given in para 2.3.7.4 (iv) of the Master Circular on Loans &
    Advances – Statutory & Other Restrictions dated July 1, 2015.

    v) The Audit Committee of the Board of banks shall review the compliance to the
    above conditions on a half yearly basis.

    Yours faithfully

    (Saurav Sinha)
    Chief General Manager-in-Charge

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