Sebi mulls carving out separate AIF category to buy distressed loans from banks

The BRSR requirement are applicable to the top 1,000 listed entities on a voluntary basis for financial year 2021-22 and on a mandatory basis from financial year 2022-23.

Markets regulator Sebi is planning to carve out a separate category in Alternative Investment Funds (AIF) whereby such entities can purchase distressed loans from banks and NBFCs.

Pointing out the growing number of AIFs, Sebi Chairperson Ajay Tyagi said on Thursday that the last financial year saw 90 new AIFs getting registered with the regulator under different categories, taking the total number to more than 700.

Moreover, the cumulative investments by AIFs increased from around Rs 1.5 lakh crore to around Rs 2 lakh crore, indicating a growth of 33 percent in a year, he said at the 12th CII Financial Market Summit.

With the potential to attract a lot of capital, AIFs can be a suitable vehicle to channel funds from sophisticated investors, individual and institutional, to purchase distressed loans from banks and NBFCs (Non-Banking Finance Companies), Tyagi said.

''This would unlock the capital of banks and NBFCs and make it available for fresh lending. A new sub-category of AIFs could be carved out for this purpose,'' he added.

Acknowledging the pick-up in the launching of ESG-themed schemes by mutual funds in India over the past few years, Tyagi said the regulator, at present, is engaging with the industry about disclosing certain broad ESG-related parameters in respect of such schemes.

He said Environmental, Social, and Governance (ESG) aspects of the asset management industry are another area of focus.

''While on one hand, there is increasing demand for ESG investments and disclosures, on the other hand, there are also concerns about greenwashing,'' he added.

Sebi chief asked corporates houses to consider adopting BRSR (Business Responsibility and Sustainability Report) norms this financial year itself. This may also facilitate attracting global capital targeted towards better-governed companies. The BRSR requirement applies to the top 1,000 listed entities voluntarily for the financial year 2021-22 and a mandatory basis from the financial year 2022-23.

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