On December 19, 2023, the Reserve Bank of India(RBI) issued a notification whereby regulated entities (REs) (including all commercial banks, and non-banking financial companies) were prohibited from making investments in any scheme of alternative investment funds (AIFs) which has downstream investments either directly or indirectly into any company to which the RE currently has or previously had a loan or investment exposure anytime during the preceding twelve months (debtor company).
The move was intended to tackle the problem of structures which are intended to result in evergreening of bad debts, and while the intentions were right, AIFs are REs are still reeling under the impact of the notification. Even a month after the notification came into effect, the repercussions of the notification are being felt as REs announce the consequences of the notification on their financials, and measures they are taking to address the fallout.
Please click here to read the full article by Archana Tewary and Nikhil P. Joseph published in Business Today.
Archana has worked in private equity, capital markets and general corporate teams and has primarily worked on investments by private equity investors in unlisted companies and offerings of equities and securities by listed and unlisted companies.