Private bank profits see impact of alternate investment fund provisions

Higher risk weights on unsecured loans deplete capital

The bottom lines of several private sector banks have taken a hit following the recent guidelines released by the Reserve Bank of India (RBI) on alternate investment fund (AIF) investments.

Last month, the RBI announced that regulated entities, such as banks, non-bank lenders, and home financiers, cannot invest in AIFs that have directly or indirectly invested in companies that have borrowed money from the lenders.

In case an entity had already made such an investment, they must liquidate the investment or make 100 per cent provision, RBI had said.

HDFC Bank – the largest private sector lender, along with ICICI