What changed
RBI inserted a new paragraph 137A in Chapter IX of the SFB Credit Facilities Directions, replacing the earlier placeholder. This explicitly permits SFBs to lend to InvITs registered with SEBI, subject to detailed conditions on policy, valuation, end-use monitoring, and repayment structures.
What it means for you
SFBs now have a clear regulatory pathway to finance infrastructure through InvITs, expanding their lending universe. However, the conditions—especially the 80% completed-asset threshold and ban on bullet repayments—will require careful credit appraisal and portfolio monitoring. Banks must update their credit policies and ensure compliance with trust deed provisions.
What you must do
- Formulate a board-approved policy for InvIT lending covering appraisal, underwriting, exposure limits, and monitoring.
- Verify that the InvIT is listed and at least 80% of its assets are in completed, revenue-generating infra projects with positive cash flows for one year.
- Ensure loan agreements prohibit bullet/balloon repayments and align repayment schedules with projected cash flows.
- Monitor end-use to prevent financing of stressed SPVs or activities not directly permitted under extant regulations.
- Review trust deeds of borrowing InvITs to confirm they allow borrowings and do not restrict bank's enforcement rights.
Who it affects
Small Finance Banks, Infrastructure Investment Trusts (InvITs), SEBI-registered InvIT sponsors and managers, Borrowing SPVs of InvITs
Can SFBs lend to unlisted InvITs?
No. The directions explicitly permit lending only to listed InvITs, including those under SEBI InvIT Regulations sub-regulations 14(2) and 14(4), provided the 80% completed-asset condition is met and such assets have generated positive cash flows for at least one year.
Are bullet repayment structures allowed?
No for credit facilities, but the restriction does not apply to exposures through investment portfolio in bonds, debentures, and commercial paper. The directions prohibit bullet or ballooning repayment structures to avoid concentrated principal repayments at the end of the loan tenure. However, repayment schedules can be structured in line with projected cash flows.
Can SFBs refinance existing SPV loans through InvIT lending?
Yes, but only for credit facilities towards completed projects that have achieved commencement of commercial operations. Refinancing of stressed SPVs is not allowed.