RBI eases rules on regulated entities' investment in AIFS

THE RESERVE BANK of India (RBI) on Wednesday eased its recently tightened rules that had mandated lenders (regulated entities or REs) to set aside higher provisions if they have bought into alternative investment funds (AIFS) that, in turn, invested in the lender's borrowers.

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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, the RBI said on Wednesday.

The modified circular addressed to commercial banks, cooperative lenders and NBFCs, including housing finance companies and other financial institutions, said deduction from capital shall take place equally from both tier-1 and tier-2 capital of an RE.

The revision was made to ensure that the rules were uniformly implemented among lenders and to address stakeholders' concerns, the RBI said in a release.