RBI Big Announcement 2024: Ceasing New Loans via Alternative Investment Funds (AIF) to Curb Evergreen Loans

RBI Big Announcement 2024:- The Reserve Bank of India has taken an important decision. The Alternative Investment Fund (AIF) will stop taking new loans to repay old ones (evergreen loans). If any bank is doing such a thing, they have to stop it within the next 30 days. Read the full news for more details on this.

RBI Big Announcement 2024

RBI’s Message to Lending Banks:- According to the RBI, if a company takes a loan from a bank, it cannot take more loans to repay the principal amount of the loan. Earlier, there was a method of taking such loans called “evergreen loans.” In this, the company used to repay the principal amount of its previous loan by borrowing through the Alternative Investment Fund (AIF). But the RBI has stopped this procedure now. Banks and non-banking financial companies are prohibited from investing in such AIFs, which have invested in borrowing companies in the last 12 months. Its objective is to reduce the debt burden and bring stability to the financial system.

RBI Big Announcement 2024
RBI Big Announcement 2024

RBI Big Announcement 2024 – the decision has been taken as the RBI wants banks and financial institutions to lend more cautiously and better verify the repayment capacity of borrowers. This will help reduce the risk of default and stabilize the financial system.

Breaking News: Hero Electric Launch with Vida V1 Pro Scooter

All banks have to comply with this order.

As per the RBI’s new rules, banks and NBFCs will have to wind up such investments within 30 days. If they cannot close the investment within the stipulated period, they have to make 100 percent provision for such an investment.

Suppose a bank invests in an AIF that invests in a company that has taken a loan from a financial institution. As per the RBI’s new rules, banks have to close this investment within 30 days. If the bank is unable to close the investment within the stipulated period, it has to make 100 percent provision for this investment. This means that the bank must be prepared for potential losses on these investments.

Some other institutions fall under the category of alternative investment funds, including venture capital funds, angel funds, infrastructure funds, private equity funds, and hedge funds. The Reserve Bank has issued a circular saying that certain lending transactions involving AIFs are raising the regulator’s concerns. These transactions include issuing new loans to repay old loans. The Reserve Bank said that new steps have been taken to stop such transactions.

Balika Samriddhi Yojana 2024: Benefits, Document, Application Process?

Final Words for the RBI Big Announcement

The RBI has said that banks and NBFCs will have to stop investing in units of AIFs that invest in lending companies. The RBI feels that such investments may increase the risk of financial institutions. All banks or financial institutions that are doing this have to stop such work within the next 30 days.

Leave a Comment