A recommendation concerning banks’ investments in alternative investment funds (AIFs) has been released by the Reserve Bank of India. The most recent advice from the central bank addresses how much money they have invested in these funds.
In accordance with a release released on Wednesday, banks are only required to make provisions for the portion of their AIF scheme investment that is subsequently invested in the debtor company by the AIF, not for the lender’s entire AIF scheme investment.
“With a view to ensuring uniformity in implementation among the REs, it is advised [that] downstream investments shall exclude investments in equity shares of the debtor company of the RE, but shall include all other investments, including investment in hybrid instruments,” the RBI stated in a release on Wednesday.
When an AIF scheme in which the RE is already an investor makes a downstream investment in any such debtor company, the RBI had earlier in December of last year stated that the RE must liquidate its investment in the scheme within 30 days of the date of the AIF’s downstream investment.
REs would have to make a 100% provision on such investments if they are unable to liquidate within the allotted time frame, the statement stated.
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