Quiz on RBI Strengthens Regulations to Curb Loan Evergreening through Investments in AIFs
The Reserve Bank of India (RBI) has recently implemented stringent norms to prevent the evergreening of loans through investments in Alternative Investment Funds (AIFs). AIFs, defined as privately pooled investment vehicles collecting funds from sophisticated investors, have been categorized into three groups based on their investment objectives. This move by the RBI aims to enhance transparency and prevent malpractices in the financial sector.
Categories of AIFs:
- Category I: This includes investments in start-ups, social ventures, small and medium enterprises (SMEs), and similar entities. Examples of Category I AIFs are Venture Capital Funds and SME Funds.
- Category II: Investments in equity and debt securities fall under Category II. Real estate funds and private equity funds are examples of Category II AIFs.
- Category III: Investments targeting short-term returns through complex trading strategies, such as hedge funds and Private Investment in Public Equity (PIPE) funds, fall under Category III AIFs.
