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AIFs under Sebi, RBI radar for evergreening loans, other violations: report

Economic Times  

Capital markets regulator the Securities and Exchange Board of India (Sebi) and the Reserve Bank of India (RBI) are investigating about a dozen cases of alternate investment funds (AIFs) allegedly being used to circumvent regulations, including "evergreening" of stressed loans. Sebi has detected at least a dozen cases involving INR 150-200 Billion (about USD 1.8-2.4 Billion) where AIFs have been misused to circumvent rules of other financial regulators including the Reserve Bank of India (RBI). The cases under investigation include instances of non-bank lenders selling stressed loans to AIFs partially set up by the lender itself, with the fresh funds being used to repay the original debt to prevent the loans from turning bad. The investigations could lead to increased disclosures and greater scrutiny for an investment category including private credit funds that have drawn billions of dollars from local and global high net-worth investors because of the flexibility they offer and liberal regulations.