{"id":26165,"date":"2019-11-01T17:01:42","date_gmt":"2019-11-01T11:31:42","guid":{"rendered":"https:\/\/enterslice.com\/learning\/?p=26165"},"modified":"2019-11-01T17:02:42","modified_gmt":"2019-11-01T11:32:42","slug":"rbi-allows-banks-to-lend-to-invits","status":"publish","type":"post","link":"https:\/\/enterslice.com\/learning\/rbi-allows-banks-to-lend-to-invits\/","title":{"rendered":"RBI Relieves InvITs : Allows Banks to Lend to InvITs"},"content":{"rendered":"<p style=\"text-align:center\"><strong><em>RBI has permitted Banks to lend to InvITs , while keeping certain conditions in mind<\/em><\/strong><\/p>\n\n\n\n<p class=\"has-drop-cap\">As per RBI&rsquo;s notification, banks now will be allowed to lend to InvITs. An <strong>Infrastructure Investment Trust (InvITs)<\/strong> is a <strong>Collective Investment Scheme <\/strong>similar to a mutual fund. They are designed to pool money from individuals and institutional investors and invest them in assets linked to infrastructure and gain profit out of that. Banks will be allowed to lend to InvITs provided none of the underlying <strong>special purpose vehicles (SPVs)<\/strong>, which have bank loans, are going through <strong><a href=\"https:\/\/enterslice.com\/learning\/financial-services-innovation-growth\/\">financial instability<\/a><\/strong>. <\/p>\n\n\n\n<h2 class=\"wp-block-heading\">What is an SPV?<\/h2>\n\n\n\n<p><\/p><div class=\"shadow1\"><p>A Special Purpose Vehicle(SPV) is a separate legal entity created by an organization. SPV has its own assets and liabilities as well as its own legal status. In case when the parent company gets <strong>bankrupt<\/strong><sup><a href=\"https:\/\/en.wikipedia.org\/wiki\/Bankruptcy\">[1]<\/a><\/sup>, SPV comes into rescue and carries forward the operations of the parent company.<\/p><\/div>\n\n\n\n<h2 class=\"wp-block-heading\">Role of InvITs<\/h2>\n\n\n\n<p>The credit profile of InvITs is stronger as compared to infrastructure projects because of the benefits gained from asset diversification, cash pooling, and regulatory restrictions. InvITs raise a major amount of its funds from the unitholder. <\/p>\n\n\n\n<p>Although, debt also forms an important part of the InvITs fundraising for optimizing return on investment. Without the availability of Bank Loans, debt was being availed at SPV level which resulted in operational complexity and higher credit cost.<\/p>\n\n\n\n<div class=\"mt-2 mb-3 inner-add-form-blog\">\n\t\t\t\t\t\t\t \t<div class=\"row align-content-center\" style=\"align-items: center;\">\n\t\t\t\t\t\t\t\t \t<div class=\"col-xs-12 col-sm-12 col-md-12 col-lg-4\">\n\t\t\t\t\t\t\t\t\t\t<div class=\"enterslice-logo-form\">\n\t\t\t\t\t\t\t\t\t\t\t<img decoding=\"async\" src=\"https:\/\/s3.amazonaws.com\/myamcatimages\/company\/images\/5220.png\" alt=\"logo enterslice\"\/>\n\t\t\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t\t\t\t\t\t<div class=\"col-xs-12 col-sm-12 col-md-12 col-lg-8\">\n\t\t\t\t\t\t\t\t\t\t<h3><a class=\"glossaryLink\"  aria-describedby=\"tt\"  data-cmtooltip=\"&lt;div class=glossaryItemTitle&gt;NBFC&lt;\/div&gt;&lt;div class=glossaryItemBody&gt;Non-Banking Financial Companies (NBFC) operate similarly to banks but do not possess the legal status of a bank. Registered under the Companies Act 2013 and governed by the RBI Act&amp;#039;s section(...)&lt;\/div&gt;\"  href=\"https:\/\/enterslice.com\/learning\/terms\/nbfc\/\"  data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]'>NBFC<\/a> Registration<\/h3>\n\t\t\t\t\t\t\t\t\t\t<ul class=\"check-none\">\n\t\t\t\t\t\t\t\t\t\t\t<li>Finance Company Registration<\/li>\n\t\t\t\t\t\t\t\t\t\t\t<li>Business Plan &amp; <a class=\"glossaryLink\"  aria-describedby=\"tt\"  data-cmtooltip=\"&lt;div class=glossaryItemTitle&gt;Market&lt;\/div&gt;&lt;div class=glossaryItemBody&gt;A market is a structured environment, either physical or virtual, where buyers and sellers convene to trade goods and services. This trading hub operates based on the principles of supply and(...)&lt;\/div&gt;\"  href=\"https:\/\/enterslice.com\/learning\/terms\/market\/\"  data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]'>Market<\/a> Analysis<\/li>\n                                            <li>Legal Advisory for NBFC<\/li>\n                                            <li>Audit Support Services<\/li>\n                                            <li>Go to Market Strategy<\/li>\n\t\t\t\t\t\t\t\t\t\t<\/ul>\n\t\t\t\t\t\t\t\t\t\t<a href=\"https:\/\/enterslice.com\/nbfc-registration\" class=\"btn-learn-more\">Learn More<\/a>\n\t\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t\t\t\t\t <\/div>\n\t\t\t\t\t\t\t <\/div>\n\n\n\n<p>Banks and other stakeholders have been seeking clarity on the provision of credit facilities to InvITs. This matter has been looked into by RBI and has decided to allow banks to lend to InvITs. <\/p>\n\n\n\n<p><\/p><div class=\"shadow1\"><p>As per RBI Banks need to put in place a board-approved policy on exposures to InvITs which shall cover the appraisal mechanism, sanctioning conditions, internal limits, monitoring mechanism, etc.<\/p><\/div>\n\n\n\n<h2 class=\"wp-block-heading\">Conditions Banks need to follow to lend to InvITs<\/h2>\n\n\n\n<p>RBI suggests that Banks should assess all critical parameters, including the sufficiency of cash flows at the InvIT level without any prejudice to generality. The overall leverage of InvITs and underlying SPVs when combined together should fall within permissible leverage as per the Board approved the policy of the Banks. Banks shall also keep a check on the performance of SPVs as the ability of InvITs to clear their debts largely depends upon the performance of these SPVs.<\/p>\n\n\n<a href=\"https:\/\/enterslice.com\/learning\/wp-content\/uploads\/2019\/11\/NOT83E4341768B94C4A238C806858209C15D7.pdf\" class=\"pdfemb-viewer\" style=\"width: 767px; \" data-width=\"767\" data-height=\"max\" data-toolbar=\"bottom\" data-toolbar-fixed=\"on\">NOT83E4341768B94C4A238C806858209C15D7<br><\/a>\n<p class=\"wp-block-pdfemb-pdf-embedder-viewer\"><\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Conclusion<\/h2>\n\n\n\n<p>InvITs are very important for the infrastructure sector and helps to channelize a long term investment in the sector. Over the years, RBI and SEBI have taken numerous steps to strengthen the regulatory framework while keeping in mind the genuine problems faced by InvITs. Now after the availability of bank finance, InvITs have gained more prominence. This move by RBI of allowing banks to lend to InvITs gains more significance as the National Highways Authority of India (NHAI) is looking to issue InvITs as part of its asset monetization plan.<\/p>\n\n\n\n<div class=\"read\"><p><b>Also, Read:<\/b> <mark><a href=\"https:\/\/enterslice.com\/learning\/rbi-ruled-out-special-liquidity-facility-for-nbfcs\/\" target=\"_blank\" rel=\"noopener noreferrer\">RBI Ruled Out Special Liquidity Facility for NBFCs<\/a><\/mark>.<\/p><\/div>\n","protected":false},"excerpt":{"rendered":"<p>RBI has permitted Banks to lend to InvITs , while keeping certain conditions in mind As per RBI&rsquo;s notification, banks now will be allowed to lend to InvITs. An Infrastructure Investment Trust (InvITs) is a Collective Investment Scheme similar to a mutual fund. They are designed to pool money from individuals and institutional investors and [&hellip;]<\/p>\n","protected":false},"author":26,"featured_media":26166,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[2620],"tags":[],"acf":{"service_id":"220"},"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v14.6.1 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>RBI Relieves InvITs: May allow Banks to Lend to InvITs<\/title>\n<meta name=\"description\" content=\"As per RBI&#039;s notification, Banks will be allowed to lend to Infrastructure Investment Funds (InvITs). InvITs will gain more prominence after this.\" \/>\n<meta name=\"robots\" content=\"index, follow\" \/>\n<meta name=\"googlebot\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<meta name=\"bingbot\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/enterslice.com\/learning\/rbi-allows-banks-to-lend-to-invits\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"RBI Relieves InvITs: May allow Banks to Lend to InvITs\" \/>\n<meta property=\"og:description\" content=\"As per RBI&#039;s notification, Banks will be allowed to lend to Infrastructure Investment Funds (InvITs). 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By means of conducting in-depth research on industry related topics, Shubham often builds flawless and intelligible legal content for populace from all walks of life.","postViews":446,"readingTime":2,"nextPost":{"id":26251,"slug":"impact-of-gst-on-rwa"},"prevPost":{"id":26071,"slug":"sebi-to-regulate-abrupt-resignation-of-auditors"},"featuredMediaUrl":"https:\/\/enterslice.com\/learning\/wp-content\/uploads\/2019\/11\/RBI-allows-Banks-to-Lend-to-InvITs.jpg","postTerms":"RBI Notification","_links":{"self":[{"href":"https:\/\/enterslice.com\/learning\/wp-json\/wp\/v2\/posts\/26165"}],"collection":[{"href":"https:\/\/enterslice.com\/learning\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/enterslice.com\/learning\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/enterslice.com\/learning\/wp-json\/wp\/v2\/users\/26"}],"replies":[{"embeddable":true,"href":"https:\/\/enterslice.com\/learning\/wp-json\/wp\/v2\/comments?post=26165"}],"version-history":[{"count":0,"href":"https:\/\/enterslice.com\/learning\/wp-json\/wp\/v2\/posts\/26165\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/enterslice.com\/learning\/wp-json\/wp\/v2\/media\/26166"}],"wp:attachment":[{"href":"https:\/\/enterslice.com\/learning\/wp-json\/wp\/v2\/media?parent=26165"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/enterslice.com\/learning\/wp-json\/wp\/v2\/categories?post=26165"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/enterslice.com\/learning\/wp-json\/wp\/v2\/tags?post=26165"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}