RBI Eases AIF Investment Norms for Lenders — Raises cap to 20% corpus

Current Context: On July 29, 2025, the Reserve Bank of India (RBI) issued relaxed norms for lenders investing in Alternative Investment Fund (AIF) schemes under the new Investment in AIF Directions, 2025.

Key Changes:

• Individual cap: A single regulated entity (RE) like a bank or NBFC can invest up to 10% of an AIF scheme’s corpus.
• Collective cap: All REs together can invest up to 20% of the corpus (up from 15% in draft norms).
• Provisioning rule eased: If an AIF invests in a debtor company of the lender (excluding equity instruments), the lender must now provision only proportionately, not 100%.
• Equity carve-out: Investments in equity shares, CCPS, and CCDs are excluded from provisioning norms.

These changes aim to balance risk management with growth, especially after concerns over loan evergreening via AIFs.

The new norms take effect from January 1, 2026, but lenders may adopt them earlier based on internal policy.

Question:

Q.1 What is the maximum that a single regulated entity (RE) such as a bank or NBFC can invest in an AIF scheme under the revised norms?
a) 5% of the AIF’s corpus
b) 10% of the AIF’s corpus
c) 15% of the AIF’s corpus
d) No cap specified

Answer: b) A single RE—whether a bank or non-banking financial company (NBFC)—can now invest up to 10% of the corpus of an Alternative Investment Fund (AIF) scheme.