Private Equity

Fund News

Sebi may make it mandatory for AIFs to exclude certain investors to prevent evergreening

Business Standard  

The Securities and Exchange Board of India (Sebi) plans to mandate the managers of alternative investment funds (AIFs) to exclude certain investors while making investments, in a bid to address concerns about the evergreening of loans at the fund level.Sebi first codified the ‘excuse-exclude’ norms in April 2023, giving AIFs an option to exclude investors in certain circumstances. Through the fresh proposal, Sebi is seeking to convert this discretion into an obligation for AIFs.According to the proposal, an AIF manager will be required to carry out specific due diligence before each investment by the fund to ensure that it does not facilitate the circumvention of regulations issued by the capital market, insurance or banking regulators.Sebi has identified over INR 30,000 crore worth of investments in circumvention of several regulations by loan evergreening, violation of the Foreign Exchange Management Act (FEMA), and norms around qualified institutional buyers.