RBI Issues Revised Framework for AIFI Lending to Infrastructure Investment Trusts (InvITs)
Circular Reference: DOR.CRE.REC.93/07.01.007/2026-27 Date: June 10, 2026 Issued by: Reserve Bank of India Effective Date: October 1, 2026
Background
The Reserve Bank of India has issued the Reserve Bank of India (All India Financial Institutions – Credit Facilities) Amendment Directions, 2026, amending the existing AIFI Credit Facilities Directions, 2025. The amendment replaces paragraphs 123 to 126 of Chapter VI with a comprehensive set of new provisions (Paragraphs 126A to 126E) governing lending by All India Financial Institutions (AIFIs) to Infrastructure Investment Trusts (InvITs).
This framework is relevant to AIFIs such as NaBFID, NHB, NABARD, and EXIM Bank, and has significant implications for infrastructure financing through the InvIT route.
Key Provisions of the Amendment
1. Eligibility to Lend (Para 126A)
AIFIs are now expressly permitted to lend to InvITs that are registered with and regulated by SEBI.
2. General Conditions (Para 126B)
Board-Approved Policy: Every AIFI must put in place a Board-approved lending policy covering appraisal mechanisms, sanctioning conditions, underwriting norms, DSCR benchmarks, internal exposure limits (individual and aggregate), monitoring mechanisms, and appropriate covenants. Given that InvIT valuations are primarily based on projected cash flows, AIFIs must independently satisfy themselves on the valuation methodology and assumptions used.
Legal Compliance: AIFIs must verify that applicable legal provisions do not restrict the InvIT's borrowing eligibility or the AIFI's ability to enforce security interests. In trust-structured InvITs, the trust deed must contain relevant provisions permitting the proposed borrowing.
End-Use Monitoring: AIFIs are required to strictly monitor the end-use of funds lent to InvITs to ensure that the route is not used to finance activities not directly permitted under extant regulations.
Listed InvITs Only: AIFIs may lend only to listed InvITs. This includes InvITs under sub-regulations (2) and (4) of Regulation 14 of the SEBI (Infrastructure Investment Trusts) Regulations, 2014. In all cases, not less than 80% of the value of the InvIT assets must be invested in completed and revenue-generating infrastructure projects, and such assets must have been generating positive cash flows from operations for a period of not less than one year.
No Financing for Stressed SPVs: Lending to an InvIT must not be used to fund its SPVs that have existing loans from regulated entities and are facing financial difficulty, as defined under the RBI (All India Financial Institutions – Resolution of Stressed Assets) Directions, 2025.
Refinancing Conditions: Where AIFI financing is intended for refinancing of existing credit facilities of SPVs, such refinancing shall be undertaken only for completed projects that have achieved commencement of commercial operations.
No Bullet or Balloon Repayment: Credit facilities to InvITs shall not involve bullet or ballooning repayment structures to avoid concentration of principal repayments in the terminal phase of the loan. Repayment schedules may, however, be aligned with projected cash flows. This restriction does not apply to AIFI exposures through bonds, debentures, or commercial paper.
3. Specific Provisions for Acquisition Finance (Para 126C)
AIFIs may extend acquisition finance to an acquiring company engaged in infrastructure financing, subject to the following conditions:
Board-Approved Policy: A separate Board-approved policy on acquisition finance must be in place, incorporating underwriting benchmarks that address structural complexities, including exposure limits, equity contribution, leverage multiples, and cash-flow certainty.
Purpose: Acquisition finance may be extended to acquire control, or to increase stake towards acquiring control, over a non-financial infrastructure company as a strategic investment — meaning an investment aimed at creating long-term value through synergies, not mere financial restructuring for short-term gains.
Minimum Net Worth: The acquiring company must have a standalone as well as consolidated minimum net worth of Rs. 500 crore.
Structure of Finance: Acquisition finance may be extended directly to the acquiring company for acquisition of the target, or for on-lending to a holding company or non-financial SPV for acquisition of the target.
Target Company: The target company must be a non-financial infrastructure company. Acquisition finance shall not be extended where the target company has one or more financial entities as subsidiaries or joint ventures.
Financing Cap: Total financing by lenders shall not exceed 75% of the acquisition value, independently assessed. For listed companies, valuation is based on one independent valuer appointed by the AIFI. For unlisted companies, the lower of valuations determined by two independent valuers shall apply.
Control Establishment Timeline: Control must be established within 12 months of the first disbursal of acquisition finance, whether through a single transaction or a series of inter-connected transactions.
Subordination: All debt claims of the acquiring company or its group entities on the target company shall rank subordinate to AIFI claims for the full tenor of the credit facility.
Refinancing: Acquisition finance debt may be refinanced, subject to compliance with applicable prudential requirements, and only after acquisition finance has been concluded in all respects, resulting in establishment of control over the target.
Capital Market Exposure Limits: AIFIs must fix limits for aggregate acquisition finance exposures within the regulatory ceiling for capital market exposure as specified under the RBI (AIFI – Concentration Risk Management) Directions, 2025.
4. Prudential Ceiling on Leverage (Para 126D)
AIFIs must assess all critical parameters including sufficiency of cash flows at the InvIT level to ensure timely debt servicing. The overall leverage of the borrowing InvIT must remain within the prudential ceiling prescribed by SEBI, or a lower limit as decided by the AIFI's Board.
5. Security Coverage (Para 126E)
AIFI financing to an InvIT must be fully secured and shall include:
- Charge over the underlying immovable property (exclusive first charge, or first pari passu charge where multiple lenders are involved, governed by an inter-creditor agreement)
- Assignment of cash flows and receivables
- Pledge of equity interests held by the InvIT in the relevant SPV
- Such other legally enforceable security interests as may be applicable
Loan agreements must also provide for an escrow account to ringfence project cash flows, step-in rights for lenders, minimum termination payment provisions, and restrictions on the borrower and SPVs from issuing additional debt without existing creditor consent.
Transitional Provisions
These directions come into force on October 1, 2026, or an earlier date if adopted in entirety by an AIFI.
Existing loans to InvITs that do not conform to these amendments as on the effective date may be allowed to run off till maturity. However, AIFIs shall not review, renew, or enhance such loans after their expiry unless they are brought into compliance with these Amendment Directions.
PMK Advisors View
This amendment marks a significant step in formalising institutional credit access for the InvIT sector. The framework introduces robust governance requirements — from Board-level policies and valuation oversight to end-use monitoring and security structuring — while creating a defined pathway for acquisition finance in the infrastructure space. AIFIs and InvIT sponsors should review their existing arrangements well ahead of the October 1, 2026 effective date.
Source: RBI Circular DOR.CRE.REC.93/07.01.007/2026-27 dated June 10, 2026
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