RBI tweaks norms for investment in AIFs by lenders

Downstream investments mean the actual investment by the AIF in a company using the funds they have raised from AIF investors.

“With a view to ensuring uniformity in implementation among the REs (regulated entities), it is advised that 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,” the RBI said in a release on Wednesday.

In December, the RBI said that if an AIF scheme, in which RE is already an investor, makes a downstream investment in any such debtor company, then the RE should liquidate its investment in the scheme within 30 days from the date of such downstream investment by the AIF.

In case the REs are not able to liquidate their investments within the prescribed time limit, they will have to make a 100 percent provision on such investments, it had said.

The RBI said the 100 per cent provision requirement will now 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.

The RBI regulator clarified that investments by REs in AIFs through intermediaries such as fund of funds or mutual funds are not included in the scope of the norms on Investment in AIFs.