In a move aimed at curbing evergreening of stressed loans, the Reserve Bank of India (RBI) on Tuesday directed banks, non-banking financial companies (NBFCs) and other lenders not to invest in any scheme of alternative investment funds (AIFs) which has downstream investments in a debtor company.
An AIF means any fund established or incorporated in India which is a privately pooled investment vehicle, and which collects funds from sophisticated investors, whether Indian or foreign, for investing it in accordance with a defined investment policy for the benefit of its investors. Regulated entities (REs) make investments in units of AIFs as part of their regular investment operations. RBI, however, said that certain transactions of REs involving AIFs raise regulatory concerns.