RBI’s Draft 2026 Amendments on Concentration Risk: New Limits on Real Estate and REIT Exposures
The Reserve Bank of India has released draft Reserve Bank of India (Commercial Banks – Concentration Risk Management) Second Amendment Directions, 2026 proposing targeted changes in the existing concentration risk framework for commercial banks. These draft amendments, issued under the authority of Sections 21 and 35A of the Banking Regulation Act, 1949, focus specifically on tightening and structuring banks’ exposure to the real estate sector, including Real Estate Investment Trusts (REITs).
These changes are designed to work in tandem with the proposed Reserve Bank of India (Commercial Banks – Credit Facilities) Second Amendment Directions, 2026, thereby harmonising the credit and concentration risk regulations applicable to real estate-linked lending.
Regulatory Background and Objective
The draft amendments refer back to the existing Reserve Bank of India (Commercial Banks – Concentration Risk Management) Directions, 2025, which currently lay down the overarching norms for banks to manage exposure concentration across borrowers, sectors and asset classes.
The RBI has invoked its powers under:
Section 21of the Banking Regulation Act, 1949, relating to control over advances, andSection 35Aof the Banking Regulation Act, 1949, empowering it to issue directions in public interest and for the proper management of banking business.
Exercising these powers, the RBI has proposed recalibration of real estate exposure norms to:
- Strengthen oversight over sectoral concentration risk
- Avoid excessive build-up of exposures to cyclical or volatile segments like real estate and REITs
- Align concentration limits with the evolving structure of credit products proposed under the Credit Facilities framework
Note: These are draft Amendment Directions, circulated for comments. Final Directions may incorporate modifications based on stakeholder feedback.
Key Amendments Proposed in the Draft Directions
The draft Reserve Bank of India (Commercial Banks – Concentration Risk Management) Second Amendment Directions, 2026 propose two principal changes to Chapter V of the existing Directions, which deals with Exposure Norms.
1. Deletion of Existing Paragraph 94
Under the current framework in Chapter V – Exposure Norms, paragraph 94 is in place as part of the sectoral exposure requirements. The draft amendments categorically state that:
- Paragraph 94 of Chapter V shall be deleted in its entirety.
While the text of paragraph 94 is not reproduced in the draft, its removal signifies that the earlier formulation of real estate exposure norms is being replaced with a revised, more granular approach through new provisions.
2. Insertion of New Paragraphs 94A and 94B
In place of the deleted paragraph 94, two new provisions are proposed to be incorporated: paragraph 94A and paragraph 94B. These are central to the new concentration risk architecture for real estate exposures.
Paragraph 94A – Internal Limits on Real Estate Sector Exposures
The draft introduces a compulsory requirement for banks to adopt internal caps on real estate-related exposures. As per paragraph 94A:
“94A.