Get lenders dressing up loans to cut exposure, AIFs tell RBI
alternative investment funds (AIFs) in India have put their cards on the table.
A fund lobby has told RBI it would accept a directive that forces lenders which have used AIFs to 'evergreen' loans to slash exposure to 10% of a fund corpus within six months from the date of RBI's circular. It has also mooted a limit on investment by a non-banking finance company (NBFC) in an AIF.
Bona fide investments
The AIF industry, it is learnt, is ready to function under a regulatory framework that imposes such a cap — as exists for banks. While a bank's investment in an AIF is typically restricted to 10% of the size of the fund, no such rule exists for NBFCs.
These are among the key proposals made by the fund industry body in its representation to the Reserve Bank of India (RBI) in the wake of the central bank's sweeping measures, a person familiar with the subject told ET.
The strict dos and don'ts imposed by RBI in a circular on December 19 are aimed at restraining lenders from using AIFs to move funds to help near-delinquent borrowers and hide the stress on loan books.
