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RBI Tightens Norms for AIF Investments to Prevent "Evergreening" of Loans.

Banking & Finance | Dated: 22 Dec 2025

The Reserve Bank of India (RBI) has issued tighter norms for Regulated Entities (REs) investing in Alternative Investment Funds (AIFs). The new rules prohibit banks and NBFCs from investing in AIFs that have downstream investments in debtor companies of the said REs. This move aims to curb the practice of "evergreening" stressed loans.

🎯 Key Highlights:

  • If an AIF invests in a debtor company, the RE must liquidate its investment in the AIF within 30 days.
  • Failing liquidation, the RE must make 100% provision for such investments.
  • The directive addresses concerns that AIF structures were being used to mask bad loans in the financial system.

💡 Other Important Facts:

  • Regulation: AIF Investment Norms.
  • Target: Regulated Entities (Banks/NBFCs).
  • Goal: Prevent Evergreening.

📚 Test Your Knowledge:

RBI's new norms restrict banks from investing in AIFs to prevent which specific malpractice related to loans?

Correct Answer: Evergreening of Loans

🚀 Quick Recap:

About RBI

  • Governor – Shaktikanta Das
  • HQ – Mumbai