What changed
RBI deleted paragraphs 123-126 of Chapter VI and inserted new paragraphs 126A-126C under 'C.2 Lending to InvITs'. AIFIs are now explicitly allowed to lend to listed InvITs, with detailed conditions covering board policy, valuation, end-use monitoring, repayment structures, and acquisition finance.
What it means for you
AIFIs gain a new lending avenue to infrastructure InvITs, potentially boosting credit flow to completed, revenue-generating projects. However, strict conditions—like no lending to InvITs funding stressed SPVs, no bullet repayments, and mandatory listing—limit risk but require robust internal policies and monitoring.
What you must do
- Formulate a board-approved policy for InvIT lending covering appraisal, underwriting norms, exposure limits, and monitoring mechanisms.
- Verify that the InvIT is listed, has at least 80% of assets in completed, revenue-generating infrastructure projects with positive cash flows for over one year.
- Ensure the trust deed permits borrowings and does not restrict the AIFI's enforcement of security or lender rights.
- Monitor end-use strictly to prevent financing of activities not directly permitted, and avoid lending to InvITs funding stressed SPVs.
- Structure repayments to avoid bullet or ballooning structures, aligning with projected cash flows.
Who it affects
All India Financial Institutions (AIFIs) like NABARD, SIDBI, NHB, EXIM Bank, Infrastructure Investment Trusts (InvITs) registered with SEBI
Can AIFIs 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).
What repayment structures are prohibited?
Bullet or ballooning repayment structures are not allowed, meaning principal repayments cannot be disproportionately concentrated at the end of the loan tenure. However, repayment schedules can be aligned with projected cash flows. This restriction does not apply to exposures through bonds, debentures, or commercial paper.
Are there restrictions on refinancing existing SPV loans?
Yes, refinancing is allowed only for credit facilities of completed projects that have achieved commencement of commercial operations. Lending to InvITs that fund SPVs facing financial difficulty is prohibited.