RBI Detonate Banks Exposure to REITs, InvIts at 10% of Unit Capital

rbiBy Accommodation Times Bureau

The Reserve Bank on September 25 amended the codified acts, to make it possible
for loaners to invest in Reits and InvIts detonate such exposures to 10 percent of
the unit capital of such instruments, and also to regulate their commodity
derivatives play.
In amendments to the Master Direction- Reserve Bank of India (Financial
Services provided by banks) Directions, 2016, the central bank said banks should
not invest more than 10 percent of the unit capital of a real estate investment trust
(Reit) or an infrastructure investment trust (InvIt) subject to overall ceiling of 20
percent of its net worth.
The master directions first issued in May last year did not provide for investments
in the Reits and Invits, both newly introduced instruments.
The RBI also prohibited banks from becoming a professional clearing member of
commodity derivatives segment of SEBI-recognized exchanges unless it satisfies
certain prudential criteria.
These include bank fulfilling membership criteria of the exchanges and complying
with the regulatory norms laid down by SEBI and the respective stock exchanges
and putting in place board-approved risk control measures, among others.

The RBI also prohibited banks from offering broking services for commodity
derivatives segment of SEBI recognized stock exchanges except through a separate
subsidiary set-up for the purpose or one of its existing subsidiaries.
Laying down the conditions for allowing broking services, it said there should be
an effective risk control measures, including prudential norms on risk exposure, in
respect of each of its clients, taking into account their net worth and business
The central bank also barred the subsidiary from undertaking proprietary positions
in commodity derivatives.
The amendments also remove references to corporate debt restructuring and
strategic debt restructuring in the earlier master directions.

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