RBI Issues Revised Draft Norms For Investments In AIFs By Regulated Entities
In order to further prevent potential evergreening of loans by lenders through alternative investment funds, the Reserve Bank of India has issued revised draft guidelines for investments by regulated entities in AIFs, according to a release issued by the central bank on Monday.
Evergreening, which the banking sector regulator aims to prevent, refers to the practice of extending a new loan to repay an existing loan, which leads to the masking of non-performing assets.
Alternative investment funds are privately pooled investment vehicles that collect funds from high-net-worth individuals, either domestic or foreign.
The RBI has said that a single entity's contribution to any AIF scheme must be capped at 10% of its corpus and collectively a ceiling of 15% must be applied for investment by all entities in an AIF scheme.
Investments by a regulated entity up to 5% of the corpus of an AIF scheme will be allowed without any restriction, but if the investment surpasses 5% and has a downstream debt investment in a debtor company of the entity, then it will be required to make 100% provisions to the extent of its proportionate exposure.
RBI also said that it may exempt certain AIFs, in consultation with the government, that have been set up for strategic purposes.
The revised guidelines will be applicable prospectively and existing investments or commitments will follow the extant norms. The central bank has called for comments and feedback on the draft circular by June 8.
These guidelines have come as the central bank in December 2023 had tightened investment norms for banks and non-banking finance companies that invest in AIFs.
It had asked lenders to not invest in any AIF that has direct or indirect downstream investments in a debtor company of the regulated entities. The RBI had also asked entities to liquidate their investments in AIFs with such downstream investments within 30 days or make 100% provisions for such investments.
Following this move, the RBI observed that these regulatory measures brought financial discipline among lenders regarding their investment in AIFs, the central bank said on Monday.
-
Signature Play: The Classic Cocktail Is Dead. Or Is It?
Classic cocktails are disappearing from India's cocktail menus. But they're still being ordered, taught to bartenders and borrowed from. So, who's really having the last drink?
-
A New Samvat Wishlist: Inclusive Prosperity And Human Development
India has strengthened its economic foundations through infrastructure, digital access and enterprise. Its next growth chapter must deepen productivity, create better livelihoods and widen participation in prosperity.
-
Love, Sex Aur Dhokha: The Audacious Plot To Spy On Jensen Huang
A Taipei dinner, a Singapore chip buyer and a suspected Chinese asset: inside the alleged spy operation that got close to NVIDIA's Jensen Huang.
-
Ten Things I Learnt This Samvat
Patience can be a trap. Cheap stocks can stay cheap. Leverage can wipe you out. What did Samvat 2082 teach us? Niraj Shah writes on 10 lessons from the year gone by.
-
Talking Points This Week: Tech Nerves, FII Buying, And A Faraway Banking Shock
The global markets are not shining this Diwali. The exception in the large markets is, India.
-
Midterm Rally Lasted A Day. The Hard Reality Of A Divided US May Last Two Years | Opinion
Between a contested AI boom, a debt ceiling that arrives in 2027 and a president with every incentive to act alone, the next two years may prove more volatile than the first day's rally suggests.
-
Blue Wave Will Derail the AI Trade but Won't Dismantle the AI Era | Unhedged Position
The Democrats' sweep of the US Congress will see politics collide with economic forces both over the long and short term.
-
It's Time To Take The GST Council's Bet On Trust Global
Payment records can prove India's services exports, and clear, proportionate rules can bring foreign digital sellers into the tax net.
-
Opinion | India at 38: From Innovation Overperformer to Innovation Powerhouse
India now has 453 VC-backed deep science startups, 18 of them late-stage, after 117 percent growth since 2020. Laurus Labs, at USD 9.3 billion, is the most valuable deep science company in any middle-income economy outside China.
