- 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.
- 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).
- 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.