Jammu, March 28 -- In a significant development for the alternative investment industry, the Reserve Bank of India has relaxed some key rules for investments made by banks and other lending institutions in Alternative Investment Funds (AIFs).

The changes come as a relief to lenders who had faced restrictions in their ability to invest in certain AIF schemes due to the downstream investments made by such funds. Last year, RBI had directed banks and NBFCs to avoid investing in any AIF scheme that had exposures to debtor companies of the investing institution through indirect stakes. They were also asked to liquidate existing investments in such schemes within a month or make 100% provisions.

However, in a notification issued yesterday, th...