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RBI allows banks to lend to InvITs

The central bank in the notification has told banks to lend to these funds ‘without prejudice to generality’.

, ET Bureau|
Oct 14, 2019, 09.20 PM IST
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An Infrastructure Investment Trust (InvITs) is Collective Investment Scheme similar to a mutual fund.
Mumbai: Banks will now be allowed to lend to InvITs or Infrastructure Investment Funds, however, the sanctioning of these loans would be subject to tighter parameters of scrutiny such as having board-approved policies on exposures, compliance with prescribed leverage ratios and tighter underwriting norms for SPV linked funds.

“Banks and other stakeholders have been seeking clarity on the provision of credit facilities to InvITs. The matter has been examined and it has been decided that banks may be permitted to lend to InvITs subject to…conditions,” the Reserve Bank of India notified all banks on Monday.

The central bank in the notification has told banks to lend to these funds ‘without prejudice to generality’, and have tighter credit policies and monitoring mechanisms, especially to those which have exposures to Special Purpose Vehicles or SPVs.

An Infrastructure Investment Trust (InvITs) is Collective Investment Scheme similar to a mutual fund, which enables direct investment of money from individual and institutional investors in infrastructure projects to earn a small portion of the income as a return.

“Banks shall put in place a Board approved policy on exposures to InvITs which shall inter alia cover the appraisal mechanism, sanctioning conditions, internal limits, monitoring mechanisms… Banks shall lend to only those InvITs where none of the underlying SPVs, which have existing bank loans, is facing ‘financial difficulty’,” said the central bank.

Currently, there are three InvITs, India Grid InvIT Fund (sponsored by Sterlite Power Grid Ventures), IRB InvIT Fund (sponsored by IRB Infrastructure Developers) and IndInfravit (sponsored by Larsen & Toubro’s arm IDPL).

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