Affluence Advisory
Quick Summary
On 19th December 2023, the Reserve Bank of India (RBI), issued guidelines regarding investments made in Alternative Investment Funds (AIFs) made by Banks and Non-banking Financial Companies (NBFCs), commonly referred to as regulated entities. These guidelines are aimed at addressing the issue of "ev
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FAQ :
The RBI's main objective is to prevent the 'evergreening' of loans, a practice where bad loans are concealed by allowing borrowers to take new loans to repay existing ones.
Banks and NBFCs are prohibited from investing in any AIF scheme that holds downstream investments, directly or indirectly, in a company that is a debtor to the regulated entity within the preceding 12 months.
Regulated entities that have invested in AIF schemes falling under the new guidelines must liquidate their investments within a 30-day timeframe.
If a lender is unable to liquidate their investments within the stipulated 30 days, they are required to make a full provision, accounting for 100% of the value of those investments.
The estimated impact on Assets under Management (AUM) is substantial, ranging from INR 20,000 to INR 30,000 crores, with banks potentially needing to make provisions that affect their capital adequacy.
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