AIF-II cheer as bank taps open

The Reserve Bank of India (RBI) has allowed banks to resume investing in AIF-II or Category-II Alternate Investment Funds (AIFs). It means that banks can again invest in equity and debt funds of private equity (PE) firms. This follows a master risk circular by the RBI on Monday which provides a cap on every type of investment banks can make. The 2016 risk circular had excluded the main category of AIF — AIF-II by not mentioning it.

For the past one year, banks could not invest in private equity or credit funds, say managers at PE firms. ‘‘It is an important development, as 60 per cent of funds pooled goes into AIF-II — PE and credit funds,’’ says Gopal Srinivasan, chairman, Indian Venture Capital Association (IVCA). He is also the founder and chairman and managing director of PE firm TVS Capital.

Since the new AIF regulations in 2012, they have received commitments of nearly Rs 1 lakh crore, of this, Rs 58,000 crore got pooled in AIF-II. ‘‘Banks are a significant source, they provide 5-10 per cent of the capital,’’ he says. This, along with other positive changes in the past few years, has created a lot of excitement in the industry, says Srinivasan.