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Investment in Alternative Investment Funds (AIFs)

Reserve Bank of India (RBI) has issued directions for investment in Alternative Investment Funds (AIFs) which will replace the existing guidelines.

To whom shall the directions be applicable?

The directions shall be applicable to investments by the following regulated entities (REs) in units of AIF Schemes –

  • Commercial Banks (including Small Finance Banks, Local Area Banks and Regional Rural Banks)
  • Primary (Urban) Co-operative Banks / State Co-operative Banks / Central Co-operative Banks
  • All-India Financial Institutions
  • Non-Banking Financial Companies (including Housing Finance Companies)

What shall be the limits for investment in AIF schemes?

  • No RE shall individually contribute more than 10% of the corpus of an AIF Scheme.
  • Collective contribution by all REs in any AIF Scheme shall not be more than 20% of the corpus of that scheme.
  • Outstanding investments or commitments of a RE, made with prior approval from RBI under the provisions of Master Direction – Reserve Bank of India (Financial Services provided by Banks) Directions, 2016, are excluded from the investment limits.

What shall be the provisioning requirements?

  • If a RE contributes more than 5% of the corpus of an AIF Scheme, which also has downstream investment (excluding equity instruments) in a debtor company of the RE, then the RE shall be required to make 100% provision to the extent of its proportionate investment in the debtor company through the AIF Scheme, subject to a maximum of the direct loan and / or investment exposure of the RE to the debtor company.
  • Notwithstanding the above provisions, if a RE’s contribution is in the form of subordinated units, then it shall deduct the entire investment from its capital funds – proportionately from both Tier-1 and Tier-2 capital (wherever applicable).

What is a debtor company?

Debtor company of a RE shall imply any company to which the RE currently has or previously had a loan or investment exposure (excluding equity instruments) anytime during the preceding 12 months. Equity instrument shall refer to equity shares, compulsorily convertible preference shares (CCPS) and compulsorily convertible debentures (CCD).

What funds are exempted from the applicability of the directions?

(Updated on October 24, 2025)

RBI has, in consultation with the Government of India, exempted ‘SWAMIH (Special Window for Affordable and Mid-Income Housing) Investment Fund-I’ from the scope of the existing guidelines and the revised directions.

From when shall the directions be applicable?

The directions shall come into force from January 1, 2026, or from any earlier date as decided by a RE as per its internal policy.


References

Reserve Bank of India. (2025, October 24). 'Enlisting SWAMIH Investment Fund-I under exemption category of Reserve Bank of India (Investment in AIF) Directions, 2025'. Retrieved from https://rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=61491

Reserve Bank of India. (2025, July 29). 'Reserve Bank of India (Investment in AIF) Directions, 2025'. Retrieved from https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12886&Mode=0


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