Here’s how RBI’s new circular on AIF investments may benefit banks
The Reserve Bank of India (RBI) has revised its circular on regulated entities' (RE) investments in Alternative Investment Funds (AIFs). The modifications come after feedback and representations from stakeholders regarding the initial stringent requirements set by the central bank. The original circular, issued in December 2023, raised concerns about the potential misuse of AIF investments for loan restructuring purposes, commonly known as evergreening.Under the initial provisions, REs were required to make 100% provisioning against their entire AIF investments, impacting their profitability.However, following the recent revisions, the RBI clarified that provisioning...