The Indian central bank on Tuesday capped lenders’ collective investments in so-called alternative investment funds at 20% of the funds‘ corpus.
Alternative investment funds are privately pooled funds investing in listed, unlisted and other asset classes.
The regulator had in May proposed a cap of 15% in draft guidelines.
The investment cap for each lender has been fixed at 10%.
Lenders will need to make 100% provisions on investments in alternative investment funds that have exposure to the lenders’ borrowers, according to the rules, which will kick in from January 1, 2026.
Last year, India’s markets regulator asked fund managers of alternative investment funds to exercise stricter due diligence of investors to prevent circumvention of rules, including “evergreening” or masking of stressed loans.
In December 2023, the banking regulator barred lenders from investing in alternative investment funds that held exposures to their existing or recent borrowers. It later eased the rules in March 2024, but mandated higher provisions.
Reuters
