📅May 19, 2025 | By Prashant Marathe | EduInvesting.in
🔍 At a Glance:
The Reserve Bank of India has just releasedrevised draft Directionsfor how banks and NBFCs (called “Regulated Entities” or REs) can invest inAlternative Investment Funds (AIFs). After December’s crackdown and March’s clarifications, this new draft (open for public comments tillJune 8, 2025) aims to strike a balance betweenfinancial disciplineandflexibility, while keeping shady evergreening schemes out.
🧠 What’s This All About?
Let’s break it down in EduInvesting style:
Think of AIFs like that risky but exciting group project — it can score big or tank your GPA (or in this case, your capital adequacy ratio). RBI wants to ensure regulated entities don’t just throw public money into these funds without supervision.
In December 2023, RBI first said“No shady stuff!”— mainly to stop banks from using AIFs toevergreen loans(a trick where old, possibly defaulting borrowers are indirectly funded via third parties — like using your
friend’s credit card to pay your EMI).
Now withSEBI also laying down stricter due diligence normson AIFs, RBI is saying,“Let’s streamline this whole thing.”
🧾 Key Proposals (With Bonus Edu-Translations):
💸 1.Limit on Investment Per RE
- Old Style: Do whatever, hope for the best.
- New Style:
- Individual RE limit: Max10% of AIF corpus
- Collective RE limit: Max15% of corpus(No more gang-ups where all banks pile into one AIF like it’s Diwali shopping.)
🆓 2.Freedom Up to 5%
- If your RE investsup to 5%of the AIF’s corpus —no questions asked.
- Kind of like a free trial — use responsibly.
🚨 3.The Provision Trap
- If an RE crosses the5% threshold, and the AIF puts money into adebtor company of
