RBI Proposes Eased Norms for Bank Investments in AIFs

The Reserve Bank of India has unveiled a proposal to ease investment norms for banks, non-banking financial companies (NBFCs), and other regulated entities in Alternate Investment Funds, drawing focus to a sector crucial for economic dynamics.

In December 2023, the central bank set guidelines targeting regulatory concerns, notably the potential for evergreening through AIFs. Reflecting on the prevailing situation, the RBI noted significant improvements in financial discipline among regulated entities investing in these funds.

Further collaboration with market watchdog SEBI sees enhanced due diligence mandated for AIFs, as the RBI now seeks public feedback on these revised directions. These include a proposed 10% investment cap by a single RE in any AIF scheme, while capping collective investments by all REs at 15%. The RBI also considers strategic exemptions and encourages public comments by June 2025.

(With inputs from agencies.)