Latest news with #AIFs
Mint
6 hours ago
- Business
- Mint
RBI caps AIF investments by banks and non-banks at 10% of fund's corpus
The Reserve Bank of India (RBI) on Tuesday capped investments by banks and non-bank financiers in alternative investment funds (AIFs) at 10% of the fund's corpus, two months after it proposed relaxations to its 2023 circular. The central bank said no regulated entity should individually contribute more than 10% of the corpus of an AIF scheme and that the collective contribution of all such entities in any AIF should not cross 20% of the fund's corpus. The collective contribution limit is higher than the 15% figure proposed in May's draft circular. The RBI said these norms will apply to commercial banks, cooperative banks, all Indian financial institutions, NBFCs and housing finance companies from 1 January 2026 or earlier. According to Tuesday's circular, if a bank or a non-banking financial company (NBFC) contributes more than 5% of a scheme that also has downstream investments — excluding equity — in a borrower of the lender, the lender will have to make provisions for it. These provisions, said RBI, will be proportional to the lender's investment in the borrower through the AIF. Borrower or debtor in this case means a company to which the lender the lender has had loan or investment exposure during the preceding 12 months. As an example, consider a bank that has invested ₹ 100 crore in a ₹ 1,000 crore AIF, which in turn has invested ₹ 100 crore in a company that has borrowed from the same bank. In the December 2023 circular, the RBI had asked banks to provide for the entire ₹ 100 crore investment. On Tuesday, the RBI said lenders would have to make provisions proportionate to the investments made by the AIF in the common borrower, or ₹ 10 crore in this example. However, if a lender's contribution is in the form of subordinated units, it will have to deduct the entire investment from its capital funds – proportionately from both tier-1 and tier-2 capital, RBI said. Subordinated units are those that are lower in priority for distribution of earnings and assets. 'The guidelines directly seek to address concerns relating to the misuse of the AIF route for evergreening of loans and advancing by using AIF to finance the existing stressed loans portfolio,' said Sudhir Chandi, director at Resurgent India, a category-1 merchant bank. 'By restricting the individual contribution to 10% of the corpus of an AIF, concentration risk will be mitigated.' According to Chandi, the goal is to deter the diversion of funds from AIFs for wrongful purposes. 'The final guidelines are relaxed as they allow regulated entities (REs) to invest upto 20% of the corpus of AIF as against 15% allowed in draft guidelines,' said Anil Gupta, senior vice-president at rating agency ICRA. 'Further, in case of any common exposure between AIF and RE, the provisioning required on such investments is proportionate to the share of RE's investment in AIF corpus and not 100% as required earlier.' On 19 December 2023, RBI asked lenders not to invest in AIFs that had direct or indirect downstream investments in companies that were borrowers in the previous 12 months. Such existing investments were required to be liquidated or fully provided for in 30 days. This prompted several large private banks to make significant provisions against these investments in their financials for the last two quarters of FY24. Siddarth Pai, co-founder and managing partner, 3one4 Capital said in May after the release of the draft norms that the domestic AIF industry had around ₹ 13.5 trillion in capital commitments as of 31 March. 'The aim is to reach at least ₹ 30 trillion by 2030. For this, the simplification of regulation and the removal of artificial regulatory barriers to investing in alternatives is key," he said.
New Indian Express
6 hours ago
- Business
- New Indian Express
RBI caps investment by banks, others in AIF schemes at 10%
MUMBAI: The Reserve Bank of India (RBI), which has been frowning upon the mushrooming of alternative investment funds (AIFs) for quite sometime, has tightened the overall regulations by capping the investments by banks, non-banks and all-India financial institutions at 10% of the corpus of any such scheme. The new norms are part of the central bank's updated directions on investment in AIF schemes, issued Tuesday. The new directions will be in force from January 1, 2026 and will apply to all banks, cooperative banks, non-banks, all-India financial institutions and housing finance companies. Also, collective contribution by all regulated entities in any AIF scheme should not be more than 20% of the corpus of that scheme, said the directions. More importantly, the RBI has also mandated 100% provisioning by the investing entity in case of breach of the new investment caps, either individually or collectively. The alternative assets market in India, currently estimated at $400 billion AUM, is projected to grow 5x to $2 trillion over the next decade. According to an IBEF (India Brand Equity Forum) report, the domestic AIF industry (which includes category II funds and private credit funds) had commitments worth Rs 13 trillion or $150 billion as of December 2024. The global AIF industry is a little over $20 trillion. Of this, category II AIFs in the country, which are regulated by Sebi, including private equity, real estate, and distressed asset funds, comprised Rs 10 trillion ($115 billion) and the private credit segment accounted for 15% of total AIF commitments at Rs 1.95 trillion or $22.39 billion. As of May 2025, there are 1,550 registered AIFs in the country, according to the above-cited report, which added that the industry has surged nearly 110% in commitments in the fiscal 2025 compared to fiscal 2022. The industry is projected to surpass Rs 100 trillion or $1.15 trillion by 2030.
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Business Standard
7 hours ago
- Business
- Business Standard
RBI eases investment regulations for banks and NBFCs in AIF schemes
The Reserve Bank of India (RBI) on Tuesday eased norms on investments by regulated entities (REs) in Alternative Investment Funds (AIFs), by capping the cumulative exposure of banks and non-banking financial companies (NBFCs) in AIFs at 20 per cent, with the contribution of a single RE capped at 10 per cent of the scheme's corpus. Additionally, the RBI has excluded equity instruments as part of downstream investment made by REs in AIFs from the purview of provisions. Previously in May, the RBI, in a draft circular, had proposed an overall cap on investment by REs in any AIF scheme at 15 per cent, with the contribution of a single RE capped at 10 per cent of the scheme's corpus. The new directions come into effect from January 1, 2026, or from any earlier date as decided by an RE as per its internal policy. Additionally, in the directions issued on Tuesday, the RBI stated that if an RE contributes more than 5 per cent to the corpus of an AIF scheme that has downstream investments — excluding equity instruments — in a debtor company of the RE, then the RE must make a 100 per cent provision for its proportionate investment in the debtor company through the AIF, subject to a cap equal to its direct loan and/or investment exposure to that company. Further, the central bank stated that if an RE's contribution to an AIF is in the form of subordinated units, the entire investment must be deducted from its capital funds — proportionately from both Tier-1 and Tier-2 capital. Back in December 2023, the RBI had barred REs from investing in AIFs that have investment in existing and recent borrowers, after markets regulator Securities and Exchange Board of India (Sebi) found instances of evergreening of loans and circumvention of other market regulations through different AIF structures. Following this, several AIFs had approached the regulators with concerns that REs were struggling to honour capital calls, following the restrictions. Later in March 2024, the RBI eased provisioning norms. 'The major changes that the industry asked for and the RBI has graciously provided are: carving out of equity investments from the guidelines, and exclusion of companies in which banks/NBFCs have made equity investments in from the definition of 'debtor company',' said Siddarth Pai, cochair, IVCA Regulatory Affairs Council. 'Now, investors in AIFs will gain much comfort, with the banking regulator once again permitting its regulated entities to invest in equity AIFs. The safeguards for private credit leave an opportunity for change if the RBI gets comfort on this matter,' he said. As of March 2025, the total commitments made to AIFs stood at ~13.49 trillion while the total investments made stood at ~5.38 trillion. Investments made in equity and equity-linked securities stood at ~3.5 trillion. Of the total ~5.63 trillion fundraise, domestic investors account for ~4.08 trillion. Real estate tops the sectors in terms of investments at ~69,896 crore, followed by information technology (IT), financial services, and NBFCs. "The directions from the RBI have some positives such as clarifying that equity instruments will include CCPS (compulsorily convertible preference shares) and CCDs (compulsorily convertible debentures), which was an industry ask. The overall RE exposure has also been kept at a reasonable 20 per cent. The fact that this only gets effective from January 2026 is a welcome move as it gives fund managers sufficient time to plan their ongoing fundraise efforts," said Pallabi Ghosal, partner, Trilegal. 'The guidelines are now brought into alignment with Sebi guidelines on due diligence and investment to ensure uniformity and clarity. The guidelines directly seek to address the concern relating to the misuse of the AIF route for evergreening of loans and advancing by using AIF to finance the existing stress loans portfolio,' said Sudhir Chandi, director at Resurgent India.
Economic Times
9 hours ago
- Business
- Economic Times
RBI caps investment by a bank in AIF scheme at 10%
The Reserve Bank on Tuesday capped contributions by a single regulated entity (RE), including banks and NBFCs, at 10 per cent of the corpus of an Alternative Investment Fund (AIF) scheme. ADVERTISEMENT Also, collective contribution by all REs in any AIF Scheme should not be more than 20 per cent of the corpus of that scheme, said the Reserve Bank of India (Investment in AIF) Directions, 2025. REs refer to banks, NBFCs and All-India Financial Institutions. The RBI had issued guidelines in December 2023 and later in March 2024 prescribing the regulatory guidelines in respect of investment by the REs of the Reserve Bank in guidelines have been reviewed, inter alia, taking into account industry feedback as well as the regulations issued by the Securities and Exchange Board of India (Sebi) relating to specific due diligence of investors and investments of AIFs, the RBI said in a circular on Tuesday."No RE shall individually contribute more than 10 per cent of the corpus of an AIF Scheme," the circular said. ADVERTISEMENT Collective contribution by all REs in any AIF Scheme shall not be more than 20 per cent of the corpus of that scheme. "If a RE contributes more than five per cent of the corpus of an AIF Scheme, which also has downstream investment in a debtor company of the RE, then the RE shall be required to make 100 per cent provision to the extent of its proportionate investment in the debtor company through the AIF Scheme, subject to a maximum of the direct loan and/ or investment exposure of the RE to the debtor company," it said. The circular also said the RBI may, in consultation with the government, exempt certain AIFs from the scope of the existing circulars and the revised Directions. PTI (You can now subscribe to our ETMarkets WhatsApp channel)
Time of India
9 hours ago
- Business
- Time of India
RBI caps investment by a bank in AIF scheme at 10%
The Reserve Bank on Tuesday capped contributions by a single regulated entity (RE), including banks and NBFCs, at 10 per cent of the corpus of an Alternative Investment Fund (AIF) scheme. Also, collective contribution by all REs in any AIF Scheme should not be more than 20 per cent of the corpus of that scheme, said the Reserve Bank of India (Investment in AIF) Directions, 2025. Explore courses from Top Institutes in Please select course: Select a Course Category Healthcare Data Science Finance PGDM MCA Data Science others CXO Cybersecurity Technology Degree Digital Marketing Public Policy Project Management healthcare Data Analytics Others Product Management Design Thinking MBA Operations Management Artificial Intelligence Leadership Management Skills you'll gain: Financial Analysis in Healthcare Financial Management & Investing Strategic Management in Healthcare Process Design & Analysis Duration: 12 Weeks Indian School of Business Certificate Program in Healthcare Management Starts on Jun 13, 2024 Get Details REs refer to banks, NBFCs and All-India Financial Institutions. The RBI had issued guidelines in December 2023 and later in March 2024 prescribing the regulatory guidelines in respect of investment by the REs of the Reserve Bank in AIFs. The guidelines have been reviewed, inter alia, taking into account industry feedback as well as the regulations issued by the Securities and Exchange Board of India (Sebi) relating to specific due diligence of investors and investments of AIFs, the RBI said in a circular on Tuesday. Live Events "No RE shall individually contribute more than 10 per cent of the corpus of an AIF Scheme," the circular said. Collective contribution by all REs in any AIF Scheme shall not be more than 20 per cent of the corpus of that scheme. "If a RE contributes more than five per cent of the corpus of an AIF Scheme, which also has downstream investment in a debtor company of the RE, then the RE shall be required to make 100 per cent provision to the extent of its proportionate investment in the debtor company through the AIF Scheme, subject to a maximum of the direct loan and/ or investment exposure of the RE to the debtor company," it said. The circular also said the RBI may, in consultation with the government, exempt certain AIFs from the scope of the existing circulars and the revised Directions. PTI
