RBI Proposes 10% Cap On RE Investments In Different Funding Funds – Particulars Right here | Economic system Information

Mumbai: The Reserve Financial institution of India proposes to cap a single regulated entity’s (RE) contribution to any Different Funding Funds (AIF) at 10 per cent of its corpus whereas collectively, a ceiling of 15 per cent will apply for funding by all REs in an AIF scheme, within the revised draft instructions issued on Monday. 

Regulated entities like banks, pension funds, and insurance coverage corporations usually put money into AIFs for diversification. The RBI revised draft instructions, aimed toward tightening oversight and stopping potential misuse of the funding route, additionally stipulate that investments by an RE of as much as 5 per cent of the corpus of an AIF scheme shall be allowed with none restriction.

Nevertheless, if the funding by any RE exceeds 5 per cent of the corpus of the scheme, and if the scheme has a downstream debt funding in a debtor firm of the RE (excluding fairness shares, compulsorily convertible desire shares, and compulsorily convertible debentures), then the RE shall be required to make 100 per cent provisions to the extent of its proportionate publicity.

The proposals additional state that the RBI could exempt sure AIFs, in session with the federal government, which were arrange for strategic functions. The revised instructions issued by the RBI shall be relevant prospectively. Current investments or commitments will comply with the extant norms, based on the official assertion.

Explaining the rationale for the brand new instructions, the RBI mentioned: “On a assessment, it’s noticed that the regulatory measures undertaken by the Reserve Financial institution earlier have introduced monetary self-discipline among the many REs relating to their funding in AIFs.”

Apart from, “SEBI has additionally issued tips requiring inter alia particular due diligence with respect to traders and investments of the AIFs, to stop facilitation of circumvention of regulatory frameworks”, the RBI assertion added.

The feedback on the draft instructions have been invited from the general public/stakeholders until June 8, 2025. Feedback could also be submitted via the hyperlink underneath the ‘Join 2 Regulate’ Part obtainable on the RBI’s web site or could alternatively be forwarded to the Chief Basic Supervisor, Credit score Threat Group of the RBI.