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DAILY NEWS ANALYSIS

  • 07 November, 2019

  • 4 Min Read

Inclusive growth and issues arising from it.

Inclusive growth and issues arising from it.

Syllabus subtopic: Inclusive growth and issues arising from it.

News: The Union Cabinet has approved the creation of an Alternative Investment Fund (AIF) of Rs. 25,000 crores to provide last-mile funding for stalled affordable and middle-income housing projects across the country.

Prelims focus: About the newly announced fund, AIF- key features.

Mains focus: Significance and the need for AIFs.

Key features:

  1. The fund size will initially be Rs. 25,000 crores with the government providing Rs. 10,000 crores and the State Bank of India and the Life Insurance Corporation providing the balance
  2. The funds will be set up as Category-II Alternative Investment Fund registered with the Securities and Exchange Board of India and will be managed by SBICAP Ventures Limited.
  3. The open-ended fund is expected to swell over time. The government is also in talks with sovereign bonds and pension funds to put in money in AIF further.
  4. The Cabinet also approved the establishment of a ‘Special Window’ to provide priority debt financing for the completion of stalled housing projects in the affordable and middle-income housing sector.

What are AIFs?

As defined in the Securities and Exchange Board of India (Alternative Investment Funds) Regulations, 2012, AIFs refer to any privately pooled investment fund, (whether from Indian or foreign sources), in the form of a trust or a company or a body corporate or a Limited Liability Partnership (LLP).

  • AIF does not include funds covered under the SEBI (Mutual Funds) Regulations, 1996, SEBI (Collective Investment Schemes) Regulations, 1999 or any other regulations of the Board to regulate fund management activities.
  • Hence, in India, AIFs are private funds which otherwise do not coming under the jurisdiction of any regulatory agency in India.

Categories:

As per SEBI (AIF) Regulations, 2012, AIFs shall seek registration in one of the three categories:

  1. Category I: Mainly invests in start-ups, SMEs or any other sector that Govt. considers economically and socially viable.
  2. Category II: These include Alternative Investment Funds such as private equity funds or debt funds for which no specific incentives or concessions are given by the government or any other Regulator
  3. Category III: Alternative Investment Funds such as hedge funds or funds which trade with a view to making short-term returns or such other funds which are open-ended and for which no specific incentives or concessions are given by the government or any other Regulator.

Source: The Hindu


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