SBI Seeks Senior Creditor Status in NHIT’s InvIT Framework

In a development that could redefine investor rights in India’s infrastructure monetization landscape, the State Bank of India (SBI), the country’s largest lender, has written to the National Highways Authority of India (NHAI) requesting senior creditor status on its investments in the National Highways Infra Trust (NHIT), an Infrastructure Investment Trust (InvIT) sponsored by NHAI. The request signals growing concern over creditor protection and repayment hierarchy within the framework of InvITs, particularly in the event of default or liquidation.

This concern arises in the broader context of NHAI’s increasing reliance on InvITs regulated by the Securities and Exchange Board of India (SEBI) as a key instrument for monetising operational road assets and mobilising capital without adding to public debt. Since its launch in 2020, NHIT has completed four rounds of fundraising, mobilising approximately Rs. 460 billion, including a record-breaking Rs. 183 billion rounds in March 2025. The current roadmap includes plans to raise an additional Rs. 200 billion through similar InvIT offerings.

While SBI has long been a key financier of road infrastructure, including a $3 billion unsecured loan extended to NHAI in 2018, its current concern centres around its exposure to InvIT-backed projects. The legal complication arises from the absence of specific provisions under the Insolvency and Bankruptcy Code, 2016 (IBC) applicable to InvITs. As matters currently stand, unitholders of InvITs are accorded priority in the repayment hierarchy, and traditional lenders such as banks may not enjoy credit protection or recourse under existing insolvency laws.

Without a statutory priority status, senior lenders like SBI face limited recourse in the event of default despite bearing substantial financial exposure. SBI’s request for senior creditor status aims to restructure the repayment hierarchy, thereby affording traditional lenders a more secured position in distressed scenarios.

If accepted, SBI’s request may compel a reassessment of how InvITs balance the rights of debt investors versus equity participants (i.e., unitholders). While SEBI regulations provide a robust framework for InvIT governance, they currently do not embed specific insolvency provisions akin to corporate entities under the IBC. Given that InvITs in India comprising 5 listed and 16 unlisted trusts now manage assets exceeding Rs. 7 trillion (as per Bharat InvITs Association data), the resolution of these issues holds significant implications for investor confidence and financial stability

SBI’s push for senior creditor status highlights growing concerns over creditor protection in InvIT structures. As infrastructure monetisation accelerates, ensuring a fair risk-reward balance for both lenders and investors is essential. The outcome of these discussions may prompt regulatory refinements, paving the way for more secure and transparent InvIT frameworks in India’s infrastructure financing landscape.