New Student User- Use Code HELLO

Register Now

RBI issues advisory on banks' investments in alternative investment funds

Published on March 27, 2024
Current Context: The Reserve Bank of India (RBI) has indeed issued an advisory on banks’ investments in Alternative Investment Funds (AIFs) on 27th March 2024.
RBI issues advisory on banks' investments in alternative investment funds
  • Here are the key points from the advisory:
    • The advisory is applicable to all commercial banks, including Small Finance Banks, Local Area Banks, and Regional Rural Banks, all Primary (Urban) Co-operative Banks/State Co-operative Banks/ Central Co-operative Banks, all All-India Financial Institutions, and all Non-Banking Financial Companies (including Housing Finance Companies).
    • Banks need to only set aside provisions to the extent of their investment in the AIF scheme which is further invested by the AIF in the debtor company, and not on the lender’s entire investment in the AIF scheme.
    • 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 advisory is aimed at ensuring uniformity in implementation among the regulated entities and to address the concerns flagged in various representations received from stakeholders.

Question:

Q.1 What does the term ‘downstream investments’ exclude according to the advisory?
a. Investments in equity shares of the debtor company of the RE
b. Investments in hybrid instruments
c. The lender’s entire investment in the AIF scheme
d. The extent of their investment in the AIF scheme which is further invested by the AIF in the debtor company
ebook store

About us

ramandeep singh

Ramandeep Singh is a seasoned educator and banking exam expert at BankExamsToday. With a passion for simplifying complex concepts, he has been instrumental in helping numerous aspirants achieve their banking career goals. His expertise and dedication make him a trusted guide in the journey to banking success.

  • Follow me:
Close Menu
Close Menu