Indian banks get green light on PE

Institutions no longer have to seek approval from the Reserve Bank of India to invest in alternative investment funds.

The Reserve Bank of India has given the go-ahead for the country’s banks to invest in private equity without seeking its approval.

The RBI amended a regulation on Monday permitting investment of up to 10 percent of paid up capital. The funds are known as Category II Alternative Investment Funds.

Banks also received permission to invest up to 20 percent of their alternative assets allocation in real estate and infrastructure investment trusts.

The regulation was enforced last year, initially permitting bank investment in venture capital and social impact funds without approval. The extension to cover all alternatives was the result of a consultation with the regulator, the Securities and Exchange Board of India, banks and other stakeholders.

It follows further regulatory easing in July, extending an exemption from share sale ‘lock-in’ restrictions to alternative investment managers. The change enabled private equity firms to exit their entire stake in a portfolio company at once via listing on an Indian stock exchange.