India central bank to exempt sovereign-backed real estate fund from alternate investment fund rules

The Reserve Bank of India will exempt a government-backed real estate rescue fund from its tightened rules for alternate investment funds (AIF), it said in a notification on Friday.

The fund, called Special Window for Affordable and Mid-Income Housing (SWAMIH), was set up in 2019 to rescue stressed real estate projects by providing debt financing for stalled housing projects.

SWAMIH is managed by Ventures, a unit of government-owned State Bank of India. The lender is also a large investor in the fund.

Last year, the RBI asked banks and non-banking finance companies to raise provisions for AIF investments, including sovereign funds, if they were also lenders to the projects in which the AIFs were investing. The tightened rules, introduced to curb indirect lending risks and potential ever-greening of loans, were partially eased in March.

The government subsequently sought an exemption from these rules for sovereign-backed funds, citing their “socio-economic purpose”.

Under the current framework, a single regulated entity’s investment in any AIF is capped at 10% of the scheme’s corpus, with total combined investment by all lenders limited to 20%.