Sebi Unveils New Guidelines for AIF Borrowing and LVF Tenure Extension

Capital markets regulator Sebi introduced new guidelines for borrowing by Category I and Category II alternative investment funds (AIFs) and set limits for tenure extension by Large Value Funds for Accredited Investors (LVFs). These measures aim to balance operational flexibility with investor protection.

Capital markets regulator Sebi has introduced new guidelines for borrowing by Category I and Category II alternative investment funds (AIFs), along with defined limits for extending the tenure of Large Value Funds for Accredited Investors (LVFs).

Category I and II AIFs, typically restricted from borrowing for investments, are now permitted to borrow under specific conditions, primarily to address temporary funding needs or manage operational expenses. Such borrowing is capped at 10 per cent of investable funds and can only occur up to four times a year.

Sebi's guidelines also mandate disclosures in the Private Placement Memorandum and impose stringent conditions on borrowing. Additionally, LVFs can extend their tenure by five years with majority consent, aligning with new compliance requirements by November 18.

(With inputs from agencies.)