RBI Tightens Grip on AIF Contributions by Financial Entities

The Reserve Bank of India (RBI) has capped contributions by single regulated entities, including banks and NBFCs, to 10% of an Alternative Investment Fund (AIF) scheme's corpus. Collective contributions from all such entities must not exceed 20%. These guidelines, reviewed and revised in response to industry feedback, replace previous directives.

The Reserve Bank of India has implemented stricter rules, capping regulated entities' contributions to Alternative Investment Funds. These entities, which include banks and NBFCs, can now only contribute up to 10% to any AIF scheme's corpus.

Collectively, contributions from all regulated entities must not exceed 20% of the fund. These limitations mark a shift from prior guidelines issued in 2023 and 2024, reflecting industry feedback and new regulations by the Securities and Exchange Board of India regarding investor diligence.

Additionally, entities contributing over 5% to an AIF, with investments in debtor companies, must make a full provision for their proportional investment, capped at the entity's direct exposure to the debtor. Certain AIFs might receive exemptions from these rules upon consultation between RBI and the government.

(With inputs from agencies.)