The Reserve Bank of India (RBI) recently issued a notification on lending by banks to Infrastructure Investment Trusts (InvITs). While earlier, RBI had permitted banks to invest in units of InvITs, in the absence of clarity on lending to InvITs banks were reluctant to extend credit facilities to InvITs. Thus, despite strong credit profiles, InvITs had limited avenues of raising debt. Through the new notification, RBI has permitted banks to lend to InvITs subject to certain conditions. In ICRA’s view, this clarity will help improve debt availability for InvITs and pave the way for increased InvIT issuance by infrastructure players. According to Shubham Jain, Senior Vice-President and Group Head, Corporate Ratings, ICRA, “InvIT is a very promising vehicle for the infrastructure sector and helps to channel long-term investment into the sector. Over the years, the regulators—SEBI and RBI—have taken multiple steps to strengthen the regulatory framework while facilitating the genuine challenges faced by the InvITs. Now, with the availability of bank debt financing, InvIT issuances can further gain prominence. This can help unlock the capital of developers deployed in operational projects and improve the overall fund availability for the infrastructure sector.” The RBI’s permission for a bank lending to InvITs is subject to the bank’s board approval of a policy on exposures to InvITs, detailed assessment of the critical parameters of the InvIT and the underlying SPVs before lending, as well as monitoring performance of the underlying SPVs on an ongoing basis. Further, banks can lend only to those InvITs where none of the underlying SPVs is facing financial difficulty with its existing bank loans. RBI has also asked banks to take into consideration the legal provisions for enforcement of security while lending to InvITs. Further, RBI has permitted banks to provide debt to InvITs for acquisition of infrastructure companies provided they meet the conditions stipulated for financing promoter’s equity. So far, five InvITs have raised funds—IRB InvIT Fund, India Grid Trust, IndInfravit Trust, India Infrastructure Trust and Oriental InfraTrust—of which two were publicly offered while three were privately placed. These InvITs have together raised over $ 2 billion from investors, including pension funds and long-term investors like CPPIB, Allianz Capital, OMERS, GIC, Brookfield and Asian Infrastructure Investment Bank. The potential of InvITs is much larger with sizeable operational infrastructure assets in the country.