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    Question

    What is the cap on the cumulative exposure of Banks and

    NBFCs in Alternative Investment Funds (AIFs) , as a percentage of the AIF scheme corpus, as stated by RBI? ┬а
    A 10% Correct Answer Incorrect Answer
    B 15% Correct Answer Incorrect Answer
    C 20% Correct Answer Incorrect Answer
    D 25% Correct Answer Incorrect Answer
    E 30% Correct Answer Incorrect Answer

    Solution

    The RBI has capped cumulative exposure of regulated entities (REs) like banks and NBFCs in Alternative Investment Funds (AIFs) at 20% (up from 15%), with a 10% cap per RE per scheme, effective January 1, 2026. ┬а Equity instruments in downstream AIF investments are now excluded from provisioning norms, addressing industry concerns and aligning with SEBI regulations. If an RE invests over 5% in an AIF with downstream debt exposure to its borrower (excluding equity), it must make a 100% provision for that exposure. ┬а Contributions in the form of subordinated units will be fully deducted from Tier-1 and Tier-2 capital. The move follows past concerns over evergreening loans via AIFs and aims to tighten governance while still supporting equity AIFs. ┬а ┬а

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