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RBI allow banks to invest in REITs And InvITs and enables faster money transfer by finetuning NEFT Network

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Banks will be allowed to invest in Real estate investment trusts (REITs)and Infrastructure investment trusts (InvITs) by RBI. These trusts are a structured business model for entrepreneurs and corporates to convert their capital locked in assets through issue of units to investors. As it is prescribed by SEBI to invest in these schemes so that more investors attract towards these assets and it is helpful in widening the investment scope in banks.

  • REITs- These are the listed entities that primarily invest in leased office and retail assets to allowing developers to raise funds by selling completed building to investors.
  • InvITs– InvITs are these trust which helps in managing to generate income in infrastructure assets.

Merits Of These Investments:

  • Banks which are currently allowed to invest 20% of their Net-owned funds in equity, mutual funds, venture capital funds, and stocks may invest in these trusts within this limit.
  • Same as like in Mutual fund scheme Investors can own units in a REIT and the income is shared among investors.
  • It brings a positive approach among investors that their money is investing in a safer RBIclass assets and will give tough competition to foreign investors.
  • Beneficial for real estate developers to invest in REITs will free up capital and lower the costs.
  • SEBI is making the REITs and InvITsrules easy and attractive for the investors as well as helps in expanding the financial markets.
  • Through these trusts market has a better liquidity and the cost of capital for developers in the commercial segment will come down in near future.
  • Boon for Real estate, infrastructure and banks.

Net Owned Funds– Net Owned Funds consists of Paid up capital+ Reserve and Surplus + Long Term Liability

Mutual Funds– A mutual funds are a pool of money from various investors investing in different securities such as stocks, bonds, assets and to generate income from these securities.

Venture Capital Funds— Venture Capital Fund is the fund provided to businesses small and medium sized enterprises at a startup stage with strong growth potential.

RBI enables faster money transfer by finetuning NEFT Network

RBI enables faster money transfer by finetuning NEFT (National electronic Funds Transfer)network by increasing the number of cycle to 23 from current 12to allow faster settlement of funds and more funds to settle in a day.

  • NEFT– It is a payment system which facilitates one to one funds transfer from one bank to another in batches.

Key Points:

  • The NEFT settlement cycle will be reduced from hourly batches to half hourly batches.
  • The 11 additional settlement batches will be introduced from30 am onwardstaking to half hourly settlement batches to 23 totals.
  • 183 bankswill be participated in this system mentioned in the RBI website.
  • Limit- 50000 per transaction between Monday to Friday and for Saturday 6 settlements will be there