Affluence Advisory
Quick Summary
The Reserve Bank of India (RBI) issued a circular, RBI/2023-24/90, on December 19, 2023, addressing concerns related to investments in Alternative Investment Funds (AIFs) by regulated entities (REs). REs invests into AIF as a part of their regular investment. An AIF is a privately pooled investme
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FAQ :
An AIF is a privately pooled investment vehicle that collects funds from investors to invest according to a defined policy for the benefit of those investors.
The RBI is tightening norms to stop transactions where lenders indirectly gain exposure to borrowers through AIF investments, rather than direct loans. This aims to prevent 'evergreening' and ensure transparency.
A debtor company is defined as a company where a regulated entity (RE) currently has, or has had within the preceding 12 months, a loan or investment.
If an AIF scheme already has a lender as an investor and makes a downstream investment in a debtor company, the lender must liquidate its investment within 30 days of that downstream investment.
If lenders are unable to liquidate their investments within the 30-day timeline, they must make a 100% provision for such investments.
The new norms are effective immediately from the date of the circular's issuance.
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