Unlike the earlier circular, which provided that in case of exposure to AIFs with subordinate units, the entire provisioning may have to be made to Tier 1 entirely. It has now been clarified that it should be done equally across Tier 1 and Tier 2. This should help dilute the harsh effect of such provisioning for REs to an extent since Tier 1 capital is dear for various reasons.
India Business News: NEW DELHI/MUMBAI: The RBI's recent regulatory actions on regulated entities investing in alternatives investment funds (AIFs) are meant to check everg.
The regulatory dance around AIFs just got a double spin with both the RBI and SEBI making moves. The RBI has stated that Banks and NBFCs can t invest in AIFs funding borrowers they already have loans to. While SEBI has mandated all fresh AIF investments after September 2024 to be dematerialized. Even as it is a big step against the evergreening of loans, it could also affect ₹20,000-40,000 crore of AUM if lenders have to unwind their investments. Is this an impractical solution to a genuine problem? Host Anupriya Nair gets you details from Deepak Shenoy, Founder and CEO - Capitalmind, and ET’s Sugata Ghosh and Shilpy Sinha. Tune in to the latest episode of The Morning Brief podcast!Credits: Reserve Bank of India
In a circular dated December 19, 2023, the RBI, inter-alia, prevented banks and NBFCs from investing in schemes of AIFs that have direct or indirect downstream investment in debtor companies of such registered entities.