Direct bank lending to REITs boosts real estate sector
In a significant policy shift aimed at strengthening the property market, the Reserve Bank of India (RBI) has announced that banks are now permitted to extend loans directly to Real Estate Investment Trusts (REITs). RBI Governor Sanjay Malhotra described this move as a "positive step" that will benefit both the banking industry and the real estate sector.
Speaking to the media, Governor Malhotra clarified that while banks were previously allowed to lend to real estate companies and legal entities, trusts were excluded from this framework. The new guidelines remove this barrier, placing REITs on par with Infrastructure Investment Trusts (InvITs), which already enjoy similar borrowing privileges. This expansion is expected to infuse much-needed liquidity into the property market, which is crucial for developing cities like Bhubaneswar and Cuttack.
Beyond the real estate announcement, the RBI brought cheering news for small business owners. The central bank has doubled the ceiling for collateral-free loans for Micro, Small, and Medium Enterprises (MSMEs). The limit has been raised from Rs 10 lakh to Rs 20 lakh. Governor Malhotra noted that the previous cap was set back in 2010, and this adjustment is necessary to account for inflation and ensure smaller entrepreneurs are not denied vital financial resources.
Addressing concerns regarding market liquidity, the Governor reiterated the central bank’s commitment to keeping the economy well-funded. He emphasized that the RBI’s primary duty is to ensure productive sectors have access to capital. On the topic of government borrowing, he urged analysts to focus on "net numbers" rather than gross figures, assuring that the yield curve would be managed effectively through tools like Treasury bills.
The Governor also touched upon consumer protection, highlighting that while "mis-selling" of financial products might statistically look low, every individual case matters. He assured the public that the RBI is actively researching ways to protect bank customers. Additionally, regarding UPI subsidies, the central bank maintained that the interests of the general user remain the top priority in the digital payment ecosystem.
With Agency Inputs
