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RBI eases tightened regulations for banks' investments in AIFs

Business Standard  

The Reserve Bank of India (RBI) has eased its recently tightened rules that mandated banks and other lenders regulated by it to set aside higher provisions if they have bought into alternative investment funds (AIFs) that, in turn, have invested in the bank's borrowers.In December, the RBI barred banks and non-banking finance companies (NBFCs) from investing in AIFs that have investments in existing and recent borrowers. And should the fund invest in a lender's existing borrower, that lender would need to liquidate their investment in the AIFs in 30 days, failing which it would have provision for its full investment. Now, rather than a 100% provision, banks need to set aside funds to only cover that part of their investment in an AIF that is further invested in the debtor company.