HomeEconomicsRBI Tightens Norms For Banks, NBFCs Investing In AIFs

RBI Tightens Norms For Banks, NBFCs Investing In AIFs

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RBI Tightens Norms For Banks, NBFCs Investing In AIFs
  1. SEBI alerted RBI in November last year about instances where non-bank financiers were potentially evergreening loans by utilizing the AIF pathway. Evergreening loans involve practices to present a lower percentage of non-performing assets (NPAs) on financial books.
  2. In response to concerns regarding potential evergreening through the AIF route, RBI has released guidelines. These guidelines are directed at regulated entities such as banks and non-banking financial companies (NBFCs).
  3. RBI’s guidelines prohibit regulated entities from making investments in AIFs that have invested in a borrower or investee of that particular lender. This directive aims to curb potential instances of evergreening or hiding NPAs through indirect channels such as AIFs.
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