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Corporate Laws Central Ministry of Finance Reserve Bank of India Act, 1934

RBI has issued Reserve Bank of India (Investment in AIF) Directions, 2025

29-Jul-2025 | RBI/DOR/2025-26/138 DOR.STR.REC.43/21.04.048/2025-26

Reserve Bank of India (RBI) has issued a new Direction titled Reserve Bank of India (Investment in AIF) Directions, 2025, pertaining to investment by the regulated entities (REs) in Alternative Investment Funds (AIFs) with effect from 1st January 2026. Key Highlights of the Direction: 1. Applicability: These rules apply to the following REs investing in Alternative Investment Funds (AIFs): a. Commercial Banks (including SFBs, LABs, RRBs) b. Co-operative Banks (Urban, State, Central) c. All-India Financial Institutions d. Non-Banking Financial Companies (NBFCs and HFCs) 2. Investment Limits: a. An individual RE cannot invest more than 10% of the total corpus in an AIF. b. All REs combined cannot invest more than 20% of the total corpus in an AIF. 3. Provisioning Requirement: If an RE invests over 5% in an AIF that has downstream exposure (excluding equity instruments) to its debtor company, it must make 100% provision for that portion of the investment. 4. Capital Deduction Provision: If the investment of RE is in subordinated units, the entire amount must be deducted from capital funds, proportionally from Tier-1 and Tier-2 capital. 5. Exemptions: a. Prior approved investments under the 2016 Directions are exempt from the 10% and 20% limits. b. RBI may also exempt certain AIFs in consultation with the government (but they still must follow the general requirements). For more information, please refer to the official document.

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