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RBI googly on adherence to new Press Note 3 norms puts AIFs in a bind

Raises doubts over drawing down capital from Chinese LPs

FDI, INVESTMENT, investment, foreign investment, foreign direct investment, FPI, dollar inflow, GROWTH, MARKETS, FUNDS, SHARES, DEMAND, GROWTH, mutual fund, fund, stocks

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AIFs are privately pooled investment vehicles which collect funds from sophisticated investors, whether Indian or foreign

4 min read Last Updated : May 15 2020 | 2:02 AM IST

The Reserve Bank of India (RBI) has tapped a number of alternative investment funds (AIFs), to ascertain if their recent transactions were in accordance with the new Press Note 3 (PN3) requirements, said two people familiar with the matter.

AIFs receiving foreign investment need to submit Form InVi within 30 days from the date of issue of units, to the apex bank. The RBI has been rejecting such forms of late, seeking a declaration that these transactions are in compliance with the recent notification.

This has raised concerns that the ambit of PN3 — applicable only to foreign direct investments (FDI) so far — could extend to AIFs (both domestic and foreign) too, and thus prevent funds from drawing down capital from Chinese limited partners (LPs) for follow-on or fresh investments.