Dikhyaa Mohanty 
In the updated draft guidelines released on Monday, the Reserve Bank of India suggests capping the contribution of a single regulated entity (RE) to any Alternative Investment Fund (AIF) at 10% of its total assets, while imposing a maximum of 15% on investments made by all REs in an AIF scheme. For diversification, regulated organizations such as banks, insurance firms, and pension funds frequently make investments in AIFs. The RBI’s updated draft guidelines, which are intended to strengthen governance and guard against any abuse of the investment channel, also state that RE investments up to 5% of an AIF scheme’s corpus would be permitted without any limitations.
The RE will have to make 100% provisions to the extent of its proportionate exposure, though, if any RE’s investment exceeds 5% of the scheme’s corpus and if the scheme includes a downstream debt investment in the RE’s debtor company (apart from equity shares, compulsorily convertible preference shares, and compulsorily convertible debentures). According to the suggestions, the RBI may, after consulting with the government, exclude specific AIFs that were established for strategic reasons.
The RBI’s updated guidelines will take effect going forward. According to the official announcement, current promises or investments will adhere to the current standards.
The public and stakeholders have until June 8, 2025, to provide feedback on the draft guidelines. Comments can be sent to the RBI’s Chief General Manager, Credit Risk Group, or they can be sent using the link under the “Connect 2 Regulate” section of the RBI’s website.
