**Executive Summary**
This document outlines the Reserve Bank of India's (RBI) Directions, 2025, regarding investments in Alternative Investment Funds (AIFs) by regulated entities (REs). These Directions, updated as of October 24, 2025, take effect from January 1, 2026, or earlier as per an RE's internal policy. The Directions prescribe regulatory guidelines for investment by REs in AIFs, and replace existing circulars.
**Key Points / Main Content**
* **Short Title and Commencement:** The Directions are called the Reserve Bank of India (Investment in AIF) Directions, 2025, and will take effect from January 1, 2026, or an earlier date decided by a RE.
* **Applicability:** The Directions apply to investments by the following REs in units of AIF schemes:
* Commercial Banks
* Primary (Urban) Co-operative Banks, State Co-operative Banks, Central Co-operative Banks
* All-India Financial Institutions
* Non-Banking Financial Companies
* **Definitions:**
* *'Debtor company'* is defined as a company to which the RE currently has or has previously had a loan or investment exposure anytime during the preceding twelve months.
* *'Equity instrument'* is defined as equity shares, compulsorily convertible preference shares (CCPS) and compulsorily convertible debentures (CCD).
* **General Requirement:** A RE's investment policy must include suitable provisions governing AIF Scheme investments, in compliance with applicable laws and regulations.
* **Limits on Investments and Provisioning:**
* Individual RE contributions to an AIF Scheme cannot exceed 10% of the corpus.
* The collective contribution by all REs in any AIF Scheme must not exceed 20% of the corpus.
* If an RE contributes more than 5% to an AIF Scheme, which in turn has downstream investment into an RE's debtor company, then the RE must make a 100% provision to the extent of its proportionate investment in the debtor company.
* If an RE's contribution is in the form of subordinated units, then the entire investment is deducted from its capital funds proportionately from Tier-1 and Tier-2 capital.
* **Exemptions:**
* Investments/commitments made with prior RBI approval under the Master Direction – Reserve Bank of India (Financial Services provided by Banks) Directions, 2016, are excluded from certain limits.
* The RBI, in consultation with the Government of India, may exempt certain AIFs from the scope of the existing circulars and revised Directions (except for the General Requirement).
* SWAMIH (Special Window for Affordable and Mid-Income Housing) Investment Fund-I has been listed as an exempted AIF.
* **Repeal Provisions:**
* The following circulars shall stand repealed from the effective date of the directions:
* DOR.STR.REC.58/21.04.048/2023-24 dated December 19, 2023
* DOR.STR.REC.85/21.04.048/2023-24 dated March 27, 2024
* Outstanding investments by an RE on the date of issuance of these directions, in an AIF Scheme in which it has fully honored its commitment, shall be governed by the provisions of the existing circulars.
* Investments made by an RE as per an existing commitment or a new commitment made before the effective date must follow the existing circulars or the revised Directions in full.
**Impact Analysis**
**Stakeholder: Commercial Banks, Primary (Urban) Co-operative Banks/ State Co-operative Banks/ Central Co-operative Banks, All-India Financial Institutions, Non-Banking Financial Companies (including Housing Finance Companies)**
**Impact:**
These entities are subject to the guidelines on investments in AIFs including, but not limited to, investment limits and provisioning requirements.
**Action Required:**
REs should review and update their investment policies to ensure compliance with the new Directions. Furthermore, they should assess the impact of the provisions on existing AIF investments and future commitments and ensure that any new commitments after the effective date are in line with the revised directions.
Key Entities Referenced
Reserve Bank of India (Investment in AIF) Directions, 2025: The primary subject of this document, outlining regulations for investments in Alternative Investment Funds (AIFs) by regulated entities.
Reserve Bank of India: The issuing authority and regulator for the directions.
Alternative Investment Funds (AIFs): The investment vehicle type that the directions govern.
Banking Regulation Act, 1949: The Act under which powers are conferred to the Reserve Bank of India to issue these directions.
Master Direction – Reserve Bank of India (Financial Services provided by Banks) Directions, 2016: Referenced master direction providing exemptions under certain provisions of the new AIF directions.
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भारतीय ररजर्व बैंक बेटी बचाओ
RESERVE BANK OF INDIA
बेटी पढ़ाओ
___________________________________www.rbi.org.in___________________________________
RBI/DOR/2025-26/138
DOR.STR.REC.43/21.04.048/2025-26 July 29, 2025
(Updated as on October 24, 2025)
Reserve Bank of India (Investment in AIF) Directions, 2025
The Reserve Bank had issued the circulars DOR.STR.REC.58/21.04.048/2023-24
dated December 19, 2023 and DOR.STR.REC.85/21.04.048/2023-24 dated March
27, 2024 (“existing circulars”), prescribing the regulatory guidelines in respect of
investment by the regulated entities of the Reserve Bank (REs) in Alternative
Investment Funds (AIFs). The above guidelines have been reviewed, inter alia, taking
into account industry feedback as well as the regulations issued by the Securities and
Exchange Board of India (SEBI) relating to specific due diligence of investors and
investments of AIFs.
Accordingly, in exercise of powers conferred under Sections 21 and 35A of the
Banking Regulation Act, 1949 read with Section 56 of the Banking Regulation Act,
1949; Chapter IIIB of the Reserve Bank of India Act, 1934 and Sections 30A, 32 and
33 of the National Housing Bank Act, 1987, the Reserve Bank of India being satisfied
that it is necessary and expedient in the public interest to do so, hereby issues these
Directions hereinafter specified.
2. Short title and commencement
a) These Directions shall be called the Reserve Bank of India (Investment in AIF)
Directions, 2025.
b) These Directions shall come into force from January 1, 2026, or from any earlier
date as decided by a RE as per its internal policy (“effective date”).
3. Applicability
These Directions shall be applicable to investments by the following REs in units of
AIF Schemes:Reserve Bank of India (Investment in AIF) Directions, 2025
a) Commercial Banks (including Small Finance Banks, Local Area Banks and
Regional Rural Banks)
b) Primary (Urban) Co-operative Banks/ State Co-operative Banks/ Central Co-
operative Banks
c) All-India Financial Institutions
d) Non-Banking Financial Companies (including Housing Finance Companies)
4. Definitions
For the purpose of these Directions, following definitions apply:
a) ‘Debtor company’ of a RE shall imply any company to which the RE currently
has or previously had a loan or investment exposure (excluding equity
instruments) anytime during the preceding twelve months.
b) ‘Equity instrument’ shall refer to equity shares, compulsorily convertible
preference shares (CCPS) and compulsorily convertible debentures (CCD).
5. General Requirement
A RE’s investment policy shall have suitable provisions governing its investments in
an AIF Scheme, compliant with extant law and regulations.
6. Limits on Investments and Provisioning
a) No RE shall individually contribute more than 10 per cent of the corpus of an AIF
Scheme.
b) Collective contribution by all REs in any AIF Scheme shall not be more than 20
per cent of the corpus of that scheme.
c) If a RE contributes more than five per cent of the corpus of an AIF Scheme, which
also has downstream investment (excluding equity instruments) in a debtor
company of the RE, then the RE shall be required to make 100 per cent provision
to the extent of its proportionate investment in the debtor company through the
AIF Scheme, subject to a maximum of the direct loan and/ or investment
exposure of the RE to the debtor company.
d) Notwithstanding the provisions of paragraph 6(c), if a RE’s contribution is in the
form of subordinated units, then it shall deduct the entire investment from its
capital funds – proportionately from both Tier-1 and Tier-2 capital (wherever
applicable).
2Reserve Bank of India (Investment in AIF) Directions, 2025
7. Exemptions
a) Outstanding investments or commitments of a RE, made with prior approval
from the Reserve Bank under the provisions of Master Direction – Reserve
Bank of India (Financial Services provided by Banks) Directions, 2016, are
excluded from the scope of paragraphs 6(a) and 6(b) of these Directions.
b) The Reserve Bank may, in consultation with the Government of India, by a
notification, exempt certain AIFs (Annex) from the scope of the existing circulars
and the revised Directions (except for paragraph 5 – “General Requirement” of
these Directions).
8. Repeal Provisions
a) Following circulars shall stand repealed from the effective date of these
Directions. Any new commitment by a RE for contribution to a AIF scheme,
made after the effective date, shall be governed in terms of the revised
Directions.
Circular No. Date Subject
DOR.STR.REC.58/21.04.048 December Investments in Alternative
/ 2023-24 19, 2023 Investment Funds (AIFs)
DOR.STR.REC.85/21.04.048 March 27, Investments in Alternative
/ 2023-24 2024 Investment Funds (AIFs)
b) Notwithstanding the above repeal provisions:
i. Outstanding investment by a RE, on the date of issuance of these
Directions, in a AIF Scheme in which it has fully honoured its
commitment, shall be governed by the provisions of the existing
circulars.
ii. In respect of any investment made by a RE in a AIF Scheme in terms of
an existing commitment as on the date of these Directions, or in terms
of a new commitment entered into before the effective date, the RE shall
follow, in toto, the provisions of either the existing circulars or the revised
Directions.
****
3Reserve Bank of India (Investment in AIF) Directions, 2025
Annex
List of exempted AIFs under para 7(b)
(updated as on October 24, 2025)
1. SWAMIH (Special Window for Affordable and Mid-Income Housing) Investment
Fund-I
4