Mumbai: The Reserve Bank on Thursday allowed banks to invest in Real Estate Investment Trust (REITs) and Infrastructure Investment Trusts (InvITs), a move that will help revive the cash-starved infrastructure sector.


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Banks are allowed to invest in equity-linked mutual funds, venture capital funds (VCFs) and equities to the extent of 20 percent of their Net Owned Fund (NOF).


"It is proposed to allow banks to invest in REITs and InvITs within this umbrella limit. Detailed guidelines will be issued by May-end 2017," the RBI said in its first bi-monthly monetary policy for 2017-18.


The Securities and Exchange Board of India (Sebi) has put in place regulations for REITs and InvITs and requested the RBI to allow banks to participate in these schemes.


The policy also lays down other important developmental policies such as expanding investor base in REITs, which will help expand and deepen domestic financial markets, ICICI Bank MD Chanda Kochhar said.


Assocham President Sandeep Jajodia said this will give a boost to the sector which has been witnessing tough times in the past few years and the decision "really augurs well" for the real estate sector.


Bank of India MD Melwyn Rego felt that permitting banks to invest in REITs and InvITs is positive for the real estate and infrastructure sector as well as banks.


"Overall, the policy is well balanced with new supportive measures on asset reconstruction companies (ARCs). Banks' participation under REITs and InvITs is expected to give more investment avenues to the financial industry," said Dena Bank Chairman and Managing Director Ashwani Kumar.