RBI issues Notification for banks to lend to InvITs

Oct 17, 2019 | by Avantis RegTech Legal Research Team

The Reserve Bank of India (RBI) has issued a Notification on October 14, 2019,  vide Circular DBR.No.FSD.BC.62/24.01.040/2016-17 dated April 18, 2017 on lending of banks to infrastructure investment trusts (InvITs). 

The matter for seeking clarity on provision of credit facilities to InvITs has been examined and it is decided that banks may be permitted to lend to InvITs subject to the following conditions: 

1. A board-approved policy on exposures to InvITs covering the appraisal mechanism,                    sanctioning conditions, internal limits, monitoring mechanism, among others are to be set          up by banks.

2. Banks shall undertake assessment of all critical parameters, including sufficiency of cash              flows at InvIT level to ensure timely debt servicing.

3. 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. 

4. Banks shall also monitor performance of the underlying Special Purpose Vehicle (SPVs) on            an ongoing basis as ability of the InvITs to meet their debt obligation will largely depend              on the performance of these SPVs.

5. Banks shall lend to only those InvITs where none of the underlying SPVs, which have                  existing bank loans, is facing ‘financial difficulty’.

6. The audit committee of the board of banks shall review the compliance to these conditions          on a half yearly basis.

[RBI/2019-20/83, DBR.No.BP.BC.20/08.12.014/2019-20]



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