RBI Local Area Banks Investment Portfolio Second Amendment Directions 2026

The Reserve Bank of India has issued the Reserve Bank of India (Local Area Banks - Classification, Valuation, and Operation of Investment Portfolio) Second Amendment Directions, 2026. These updated directions introduce explicit valuation norms for units of Infrastructure Investment Trusts and Real Estate Investment Trusts held by local area banks.

Overview of the RBI Amendment Directions 2026

Published on September 22, 2026, under the authority of the Banking Regulation Act, 1949, this notification amends Chapter IX of the principal directions issued on November 28, 2025. The core intent behind this regulatory update is to bring clarity and ensure uniform valuation practices across all local area banks when dealing with hybrid instruments like InvITs and REITs.

Feature	Detail
Regulatory Body	Reserve Bank of India (RBI)
Circular Reference	RBI/2026-27/265 DOR.MRG.REC.No.229/00-00-001/2026-27
Affected Entities	Local Area Banks
Effective Date	September 22, 2026
Subject	Valuation of InvIT and REIT Units

Key Highlights and Valuation Framework

The amendment inserts two crucial paragraphs, Paragraph 83A and Paragraph 83B, into the existing Master Directions to govern the valuation of units and instruments issued by Infrastructure Investment Trusts (InvITs) and Real Estate Investment Trusts (REITs).

Valuation of InvIT Units

According to the newly inserted Paragraph 83A, quoted securities and units issued by InvITs must be valued mutatis mutandis in line with existing instructions for quoted securities. For unquoted instruments, specific rules apply:

• Units: Valuation must be executed at the Net Asset Value (NAV) disclosed by the InvIT.
• Default Valuation: If an InvIT fails to compute and disclose its NAV as per SEBI (Infrastructure Investment Trusts) Regulations, 2014, the value of those units will be treated as ₹1.
• Infrequently Traded Units: Units classified as infrequently traded under the aforementioned SEBI regulations will also carry a valuation of ₹1.
• Other Instruments: Unquoted instruments other than units shall follow the prescribed methodology specified for such instruments.

Valuation of REIT Units

Under the newly inserted Paragraph 83B, quoted securities and units issued by REITs follow instructions parallel to quoted securities. For unquoted instruments:

• Units: Valuation shall rely on the NAV disclosed by the REIT.
• Default Valuation: If a REIT defaults on computing and disclosing NAV under SEBI (Real Estate Investment Trusts) Regulations, 2014, the unit value defaults to ₹1.
• Infrequently Traded Units: Infrequently traded REIT units will similarly be valued at ₹1 for regulatory compliance.
• Other Instruments: Other unquoted instruments issued by REITs will be evaluated as per standard instrument methodologies.

Important Dates and Enforcement

The amendment directions come into effect immediately from the date of issue, ensuring that banks adopt these standardized valuation practices without delay.

Label	Date
Issuance Date	September 22, 2026
Effective Date	September 22, 2026

Who Is Affected and Next Steps

Local area banks holding investment portfolios containing units or instruments of InvITs and REITs must immediately align their portfolio classification and valuation models with these updated statutory instructions. Financial institutions should review their holdings to confirm whether any unquoted or infrequently traded units fall under the default ₹1 valuation rule due to non-disclosure of NAV by the respective trusts. For comprehensive text and compliance guidance, stakeholders can refer to the official website of the Reserve Bank of India.