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Corporate Laws Central Ministry of Finance Securities and Exchange Board of India Act, 1992

Framework for Regulated Entities making Investments in Alternative Investment Funds (AIFs)

19-Dec-2023 | RBI/2023-24/90 DOR.STR.REC.58/21.04.048/2023-24

RBI has issued framework for regulated entities making investments in Alternative Investment Funds (AIFs).

By virtue of this notification Regulated entities are advised that :-

(i) They should not make investments in any scheme of AIFs which has downstream investments either directly or indirectly in their debtor company.

For this purpose the debtor company of the RE, shall mean any company to which the RE currently has or previously had a loan or investment exposure anytime during the preceding 12 months.

(ii) If an AIF scheme, in which RE is already an investor, makes a downstream investment in any such debtor company, then the RE shall liquidate its investment
in the scheme within 30 days from the date of such downstream investment by the AIF.

(iii) If REs have already invested into such schemes having downstream investment in their debtor companies as on date, the 30-day period for liquidation shall be counted from date of issuance of this circular. REs shall forthwith arrange to advise the AIFs suitably in the matter.

(iv) In case REs are not able to liquidate their investments within the above-prescribed time limit, they shall make 100 percent provision on such investments.

In addition, investment by REs in the subordinated units of any AIF scheme with a ?priority distribution model? shall be subject to full deduction from RE?s capital funds.

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