MUMBAI: RBI has relaxed its earlier norms on alternate funding funds, which required lenders to make full provisions for his or her investments in AIFs if the fund invested in an organization that the financial institution lent to.
Beneath the revised norms, provisioning is required just for the portion of the financial institution or finance firm’s funding within the AIF scheme that’s additional invested within the debtor firm, and never the complete funding within the AIF scheme as required earlier.Additionally, funding by lenders in AIFs by intermediaries comparable to fund of funds or mutual funds will not be affected.
In Dec 2023, RBI had requested banks to totally present for investments in AIFs, which went on to put money into firms that the banks had lent to. The foundations have been geared toward stopping ‘evergreening’ – an underhand observe the place lenders present extra funds to the borrower to repay instalments in order that the loans should not have to be categorized as dangerous loans.
“The exclusion of fairness shares from the definition of downstream investments works just for investments in listed firms. It fails to account for personal fairness and enterprise capital investments that are within the type of obligatory convertible devices comparable to CCPS and CCDs. The trade is debating as to whether or not they would wish to transform all their hybrid secured to fairness to permit REs to remain invested of their funds,” mentioned Siddarth Pai, co-chair, Indian Enterprise and Alternate Capital Affiliation.
Beneath the revised norms, provisioning is required just for the portion of the financial institution or finance firm’s funding within the AIF scheme that’s additional invested within the debtor firm, and never the complete funding within the AIF scheme as required earlier.Additionally, funding by lenders in AIFs by intermediaries comparable to fund of funds or mutual funds will not be affected.
In Dec 2023, RBI had requested banks to totally present for investments in AIFs, which went on to put money into firms that the banks had lent to. The foundations have been geared toward stopping ‘evergreening’ – an underhand observe the place lenders present extra funds to the borrower to repay instalments in order that the loans should not have to be categorized as dangerous loans.
“The exclusion of fairness shares from the definition of downstream investments works just for investments in listed firms. It fails to account for personal fairness and enterprise capital investments that are within the type of obligatory convertible devices comparable to CCPS and CCDs. The trade is debating as to whether or not they would wish to transform all their hybrid secured to fairness to permit REs to remain invested of their funds,” mentioned Siddarth Pai, co-chair, Indian Enterprise and Alternate Capital Affiliation.
