- Governance, Risk & Compliance
- 1 min read
RBI gives banks and NBFCs a breather on AIF investments
The RBI has said that provisioning will be required only to the extent of the RE's investment in the AIF scheme that is further invested in the debtor company, rather than on the entire investment in the AIF scheme.
The Reserve Bank of India Wednesday cushioned the blow on banks and NBFCs that invest in Alternative Investment Funds (AIFs). The investments will exclude equity investments, but debt and hybrid instruments will continue to face additional curbs the regulator had announced earlier.
It also eased the provisioning requirements, giving relief to banks at the end of the fiscal year.
The RBI has also exempted investments by regulated entities (RE) in AIFs through intermediaries such as fund of funds or mutual funds. This could result in reversal of some of the AIF provisions which weighed on the performance of banks and NBFCs in the third quarter ended December 2023. For instance, Kotak Mahindra Bank had made a provision of ₹190 crore and RBL Bank had made a contingent provision of ₹115 crore on AIF investment.
The RBI has said that provisioning will be required only to the extent of the RE's investment in the AIF scheme that is further invested in the debtor company, rather than on the entire investment in the AIF scheme.
"The RBI has addressed the issue regarding equity investments by AIFs in debtor companies of regulated entities, clarifying that these will no longer be a provisioning or investment concern for regulated entities who are already investors or looking to invest in such AIFs," said Tejesh Chitlangi, Joint Managing Partner, IC Universal Legal.
COMMENTS
All Comments
By commenting, you agree to the Prohibited Content Policy
PostBy commenting, you agree to the Prohibited Content Policy
PostFind this Comment Offensive?
Choose your reason below and click on the submit button. This will alert our moderators to take actions