RBI Modifies Norms for Regulated Entities' Investments in AIFs

• 28 Mar 2024

RBI has recently revised regulations for regulated entities (REs) regarding their investments in Alternative Investment Funds (AIFs).

• Provisioning Norms Modified: RBI alters norms for REs regarding investments in AIFs.
• Clarification on Provisioning: REs now required to set aside provisions only for investments in AIFs further invested in debtor companies, not entire AIF investment.
• Uniformity in Implementation: Aim to ensure consistent application among REs and address stakeholder concerns.
• Exclusions and Inclusions: Downstream investments to exclude equity shares of debtor company but include other investments like hybrid instruments.
• Scope Limitations: Investments via intermediaries like fund of funds or mutual funds not covered.
• Earlier Restrictions: RBI's previous directive in December 2023 aimed to curb ever greening of loans by preventing REs from investing in AIFs with downstream investments in debtor companies.