What changed
RBI inserted paragraphs 61A and 61B into the Capital Adequacy Directions, specifying that REIT exposures are now treated as CRE with a 100% risk weight, or 125% if they meet capital market exposure criteria. Additionally, lending to REITs by overseas branches of Indian banks will carry a 150% risk weight.
What it means for you
Banks will need to reassess their REIT portfolios and adjust capital allocation, as the new risk weights increase capital requirements for these exposures. The higher 125% weight for capital market-linked REITs and 150% for overseas branch lending will particularly impact banks with significant REIT investments or cross-border operations.
What you must do
- Review all REIT exposures to classify them as CRE or capital market exposures per the new definitions.
- Update internal risk-weight models and capital adequacy calculations to reflect the 100%, 125%, or 150% risk weights.
- Assess the impact on capital ratios, especially for overseas branch lending to REITs.
- Prepare for implementation by October 1, 2026, or earlier if adopting related Credit Facilities Directions.
Who it affects
All commercial banks with REIT exposures, Banks with overseas branches lending to REITs, Risk management and capital planning teams
What is the effective date for these new risk weights?
The directions come into force from October 1, 2026, or earlier if a bank adopts the related Credit Facilities Third Amendment Directions in entirety.
How does a REIT exposure qualify for the 125% risk weight?
If the REIT exposure qualifies as a capital market exposure under paragraph 95A of the Concentration Risk Management Directions, 2025, it will attract a 125% risk weight instead of the standard 100%.