RBI UPDATES: INVESTMENTS IN REITS AND InvLts

BE/RBI/35/2017

Now lenders can invest in Reits and Invlts, and the exposure is capped at 10 per cent of the unit capital investment of such instruments, says an RBI report.

RBI had earlier, issued the Master circular, on the Financial Services of Banks, the Central Bank advised that banks should restrict themselves to 10 per cent of the unit capital of a real estate investment or an infrastructure investment which would ofcourse be subjected to an overall ceiling of 20 per cent of its net worth.  Further, following are the new guidelines brought in by RBI

  • RBI bars banks from becoming a qualified Clearing member of commodity derivatives segment of SEBI recognized exchanges, without complying with certain criteria.
  • The criteria are that the banks should satisfy membership criteria of exchanges and also adhere to the norms laid down by SEBI and other stock exchanges as may be applicable, and also should put the risk control measures in place.
  • Offering of broking services by banks, for commodity derivatives segment of SEBI recognized stock exchanges is also forbidden. However, this is permitted through a separate outfit set up by banks, for this purpose or one of its present subsidiaries.
  • RBI also strictly advises about bringing in place, an active risk control measures, which includes Prudential norms on risk exposures, on each of their clients, by taking in to account, their current net worth and business turnover.
  • As per RBI directives, subsidiaries are forbidden to undertake exclusive place, in respect of commodity derivatives.
  • The earlier references made to the Corporate debt restructuring and strategic debt restricting since stand removed.

NOTE:

Real estate investment trusts (REITs) and infrastructure investment trusts (InvITs) are investment vehicles that can be used to attract private investment in the infrastructure and real estate sectors, and also relieve the burden on formal banking institutions.

Author: Admin Bankedge

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