Overview

• The Reserve Bank of India has proposed capping individual regulated entities' contributions to Alternative Investment Funds (AIFs) at 10% of a scheme's corpus, with a collective cap of 15%.
• Regulated entities can invest up to 5% of an AIF scheme's corpus without restrictions, but exceeding this threshold requires 100% provisioning for downstream debt exposures tied to debtor companies.
• Certain AIFs established for strategic purposes may be exempted from these guidelines, subject to RBI consultation with the government.
• The guidelines align with SEBI's existing due diligence framework to prevent regulatory circumvention and mitigate hidden credit risks.
• Stakeholders and the public are invited to submit comments on the draft guidelines until June 8, 2025, to refine the proposed framework.