RBI EXEMPTS SOVEREIGN BACKED SWAMIH FUND FROM ALTERNATE INVESTMENT FUND (AIF)
Why in News
- On 24 October, The Reserve Bank of India (RBI) decided to exempt the Special Window for Affordable and Mid-Income Housing (SWAMIH) Fund — a sovereign-backed real estate rescue fund — from its tightened rules for Alternate Investment Funds (AIFs).
- The exemption aims to allow continued debt financing to stressed and stalled housing projects, ensuring liquidity and completion of homes for buyers.
BACKGROUND
- In 2023, the RBI asked banks and non-banking financial companies (NBFCs) to raise provisions for their investments in AIFs, including sovereign funds, if they were also lenders to the same underlying projects.
- This was part of measures to curb indirect lending risks and prevent ever-greening of loans.
- These rules were partially eased in March 2024, but the government sought a complete exemption for sovereign-backed AIFs citing their “socio-economic purpose”.
- The RBI accepted this request in October 2025, providing a specific exemption for the SWAMIH Fund.
CURRENT REGULATORY FRAMEWORK FOR AIF INVESTMENTS
ABOUT AIF
- Alternative Investment Funds (AIFs) are privately pooled investment vehicles that collect funds from Indian or foreign investors for investing in non-traditional asset classes like private equity, venture capital, real estate, hedge funds, etc.
- They offer exposure to alternative investment opportunities, providing diversification and higher return potential compared to traditional instruments like mutual funds or equities.
Regulation
- Regulated by the Securities and Exchange Board of India (SEBI) under the SEBI (Alternative Investment Funds) Regulations, 2012.
CLASSIFICATIONS OF AIFs BY SEBI
BENEFITS OF AIFs
AIFs & ECONOMIC GROWTH
- AIFs fuel India’s economic development by channeling funds into startups, SMEs, and infrastructure projects.
- Category I AIFs in particular boost entrepreneurship, innovation, and employment.
- Foreign investors increasingly use AIFs to participate in India’s alternative markets, contributing to FDI inflows and capital market deepening.
ABOUT SWAMIH FUND
ABOUT SWAMIH FUND 2.0
SIGNIFICANCE OF RBI’s EXEMPTION
Economic Significance
- Enables uninterrupted funding to the affordable housing segment.
- Prevents sudden liquidity crunch in sovereign-backed funds.
- Supports real estate sector recovery, a key driver of employment and GDP growth.
- Avoids project delays that could affect middle-income buyers and developers.
Social Significance
- Helps families waiting for possession of homes in stalled projects.
- Reduces financial stress for homebuyers paying both EMIs and rent.
- Promotes affordable housing, aligning with government’s Housing for All
Governance Significance
- Reflects coordinated approach between RBI and Ministry of Finance.
- Balances financial prudence with public-purpose developmental goals.
- Strengthens trust in regulatory flexibility for socio-economic objectives.
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