Skip to main content

Investments in Alternative Investment Funds (AIFs)

Reserve Bank of India (RBI) has issued an update on instructions for investments in Alternative Investment Funds (AIFs).

What is Alternative Investment Funds (AIFs)?

Alternative Investment Fund (AIF) means any fund established or incorporated in India in the form of a trust / company / limited liability partnership / body corporate which –

  • Is a privately pooled investment vehicle which collects funds from investors (Indian / foreign) for investing it in accordance with a defined investment policy for the benefit of its investors.
  • Is not covered under the Securities and Exchange Board of India (SEBI) (Mutual Funds) Regulations, 1996, SEBI (Collective Investment Schemes) Regulations, 1999 or any other regulations of SEBI to regulate fund management activities.

What are the updates on instructions for investments in AIFs?

New investments in AIF having exposure to a debtor company

  • Any company to which a Regulated Entity (RE) currently has or previously had a loan / investment exposure anytime during the preceding 12 months, is termed as a debtor company of the RE.
  • If the AIF has downstream investments (directly / indirectly) in such debtor company of the RE, the REs shall not make investments in any scheme of such AIFs.
  • The 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. 

Existing investments in AIF having exposure to a debtor company

  • If a RE is already an investor in an AIF scheme and the AIF makes a downstream investment in any debtor company of the RE, the RE shall liquidate its investment in the scheme within 30 days from the date of such downstream investment by the AIF. 
  • If REs have already invested into such schemes having downstream investment in their debtor companies as on date, the 30-day period for liquidation shall be counted from the date of the guidelines (i.e. December 19, 2023). 
  • In case REs are not able to liquidate their investments within the above-prescribed time limit, they shall make 100% provision on such investments. Provisioning shall be required only to the extent of investment by the RE in the AIF scheme which is further invested by the AIF in the debtor company, and not on the entire investment of the RE in the AIF scheme.

Investments in AIF scheme with a ‘priority distribution model’

  • Investment by REs in the subordinated units of any AIF scheme with a ‘priority distribution model’ shall be subject to full deduction from RE’s capital funds. This shall be applicable only in cases where the AIF does not have any downstream investment in a debtor company of the RE.
  • Proposed deduction from capital shall take place equally from both Tier-1 and Tier-2 capital.
  • Reference to investment in subordinated units of AIF Scheme includes all forms of subordinated exposures, including investment in the nature of sponsor units.
  • ‘Priority distribution model’ shall have the same meaning as specified in the SEBI circular SEBI/HO/AFD-1/PoD/P/CIR/2022/157 dated November 23, 2022.

Which investments are outside the scope of the updated instructions?

Investments by REs in AIFs through intermediaries such as fund of funds or mutual funds are not included in the scope of the instructions.


References

Reserve Bank of India. (2023, December 19). 'Investments in Alternative Investment Funds (AIFs)'. Retrieved from https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12572&Mode=0

Reserve Bank of India. (2024, March 27). 'Investments in Alternative Investment Funds (AIFs)'. Retrieved from https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12639&Mode=0

Securities and Exchange Board of India. (2012, May 21). 'Securities and Exchange Board of India (Alternative Investment Funds) Regulations, 2012 [Last amended on July 4, 2023]'. Retrieved from https://www.sebi.gov.in/legal/regulations/jul-2023/securities-and-exchange-board-of-india-alternative-investment-funds-regulations-2012-last-amended-on-july-4-2023-_74146.html


Follow at - Telegram   Instagram   LinkedIn   X   Facebook

Labels:

Comments

Post a Comment

Popular Posts

Modified Interest Subvention Scheme for Agricultural Loans

Reserve Bank of India (RBI) has published the modified interest subvention scheme (MISS) for short term loans for agriculture and allied activities availed through Kisan Credit Card (KCC) during the financial year 2025-26. Which loans are covered under modified interest subvention scheme (MISS)? The short-term crop loans and short-term loans for allied activities including animal husbandry, dairy, fisheries, bee keeping etc. up to an overall limit of ₹3 lakh to farmers through KCC during the year 2025-26 will be covered for interest subvention. Which lending institutions are covered under MISS? The MISS is applicable to the lending institutions viz. Public Sector Banks (PSBs) and Private Sector Banks (in respect of loans given by their rural and semi-urban branches only), Small Finance Banks (SFBs) and computerized Primary Agriculture Cooperative Societies (PACS) ceded with Scheduled Commercial Banks (SCBs), on use of their own resources.  How much is the interest subvention? The a...
Post a Comment
Read more

Digital Payments Awareness Week 2026

Reserve Bank of India (RBI) is observing digital payments awareness week from March 09 to 15, 2026. Digital Payments Awareness Week (DPAW) Digital Payments Awareness Week (DPAW) is an initiative to highlight the impact and importance of digital payments and to create awareness about safe usage of digital payment products.  Digital Payments Awareness Week (DPAW) 2026 Reserve Bank of India (RBI) is observing DPAW 2026 from March 09 to 15, 2026.  Under the mission ‘Har Payment Digital’, the theme for the current year is ‘Thoda Dhyan Se’ (be alert/ be careful). The theme emphasises the safe use of digital payments. ‘Har Payment Digital’ mission RBI had launched the mission ‘Har Payment Digital’ on the occasion of the DPAW 2023. This is part of RBI’s endeavour to make every person in India a user of digital payments. Previous Digital Payments Awareness Weeks (DPAWs) Year Theme 2025 ‘India Pays Digitally’ under the mission ‘Har Payment Digital’ ...
Post a Comment
Read more

Export and Import of Goods and Services

Reserve Bank of India (RBI) has issued regulations on export and import of goods and services. What are the regulations for declaration of exports? An exporter of goods shall furnish to the specified authority, a declaration in the Export Declaration Form (EDF) specifying the amount representing the full export value of goods, at the time of export. EDF will be deemed to be submitted as part of shipping bill for goods exported through Electronic Data Interchange (EDI) port. An exporter of services shall furnish to the specified authority, a declaration in EDF specifying the amount representing the full export value of services, within 30 days from the end of month in which invoice for services has been raised. The exporter of services who has exported services to one or more recipients in a month, may submit a single EDF for all such exports. The exporter of services other than software, may submit an EDF on or before the date of receipt of payment. In the case of a non-EDI port for ex...
Post a Comment
Read more

FEMA - Regulations on Guarantees

Reserve Bank of India (RBI) had issued regulations governing guarantees under the Foreign Exchange Management Act, 1999 (FEMA). What is a guarantee? A guarantee, including a counter-guarantee, means a contract, by whatever name called, to perform the promise, or discharge a debt, obligation or other liability (including a portfolio of debts, obligations or other liabilities), in the event of default by the principal debtor. Who are the participants in a guarantee transaction? Principal debtor – a person in respect of whose default the guarantee is given. Surety – a person who gives a guarantee. Creditor – a person to whom the guarantee is given. When can a person resident in India act as surety / principal debtor? A person resident in India may act as a surety / principal debtor for a guarantee, subject to conditions that – The underlying transaction for which the guarantee is being given or arranged is not prohibited under FEMA guidelines. The surety and the principal debtor are eligi...
Post a Comment
Read more

Priority Sector Lending (PSL) guidelines (updated as on January 19, 2026)

Reserve Bank of India (RBI) has issued the revised guidelines on Priority Sector Lending (PSL) which has come into effect from April 01, 2025.  To whom does Priority Sector Lending (PSL) guidelines apply? Priority Sector Lending (PSL) guidelines apply to – Commercial Bank [including Regional Rural Bank (RRB), Small Finance Bank (SFB), Local Area Bank (LAB)] Primary (Urban) Co-operative Bank (UCB) other than Salary Earners’ Bank  What are the categories under PSL? The categories under priority sector are as follows – Agriculture Micro, Small and Medium Enterprises Export Credit Education Housing Social Infrastructure Renewable Energy Others What are the PSL targets for banks? The targets and sub-targets set under PSL, to be computed on the basis of the Adjusted Net Bank Credit (ANBC) / Credit Equivalent of Off-Balance Sheet Exposures (CEOBSE) as applicable as on the corresponding date of the preceding year are as below – Categories Total Priority Sector ...
Post a Comment
Read more