Banks and large NBFCs are becoming more and more risk averse as the risk of bankruptcy rises exponentially as economic activity slows significantly due to curbing activities imposed to stop the spread of the virus. rice field.
Perhaps the sector that was hit hardest by the depletion of funding flows was the micro, small and medium-sized enterprises (MSMEs), as evidenced by the loss of pricing power that non-enterprises have suffered over the past two years.
In this background, Alternative investment fund ((((AIFThe industry, which manages assets of more than Rs 500 million as a whole, is playing an increasingly important role in funding the requirements of SMEs and the proper flow of credit to the sector.
Prior to the announcement of the Union Budget for 2022-23 (April-March) on Tuesday, Vineet Sukumar, Founder and Chief Executive Officer of Vivriti Asset Management, said several things to help the government drive investment from AIF. Lists important methods. In particular, it can increase access to the capital markets of small industries.
According to Skumar, one of the main ways governments can bring more investment to AIF space is to adjust the standards currently set by various regulators for insurers’ investments.
“For insurers’ investment in AIFs, insurers’ IRDA standards, NPS PFRDA standards, and EPFO standards need to be adjusted. Rating requirements should be removed altogether (and at the discretion of their respective organizations). The investment limit should be raised to 10% of assets, “Sukmar said in a dialogue with ETMarkets.com.
According to PFRDA’s existing guidelines, the NPS scheme will allow investment in Category 1 and Category 2 AIFs if they are listed or will be listed soon. In addition, the funds’ securities must have an AA-equivalent minimum rating from at least two credit rating agencies.
Regarding investment limits, IRDA guidelines set limits on AIF investments by life insurers. This is equivalent to 3% of each fund and 5% of the investment assets of non-life insurance companies.
According to Sukumar, another key industry demand is that fixed income investment in Category 1 and Category 2 AIFs does not involve market risk as these funds are primarily long-term investments and are not transaction oriented. That is.
“Therefore, the RBI needs to match the risk weight of a bank’s investment in AIF with corporate bonds determined by domestic credit rating agencies,” Sukmar said.
In terms of taxation, Sukmar urged the government to enable the pass-through status equivalence of Category 3 AIFs, which is consistent with what was given to Category 1 and 2 AIFs.
For Cat III AIF, pass-through status must be explicitly granted along with Cat I and Cat II AIF. In addition, given that AIFs are managed purely for the benefit of contributors, pass-through status for all AIF categories should be given to business and investment income as well. This completely eliminates ambiguity and greatly increases market confidence in AIF.
“Cat I and IIA IF enjoy pass-through status, which means that the returns or losses generated by the fund were directly invested by the investor,” Sukmar said.
“Given that AIF is managed purely for the benefit of contributors, pass-through status for all AIF categories should be given to business and investment income as well. This completes the ambiguity. It will be resolved and the market confidence in AIF will be greatly improved. ”
Budget 2022: What does AIF want with this budget? Vivriti Asset Management CEO points out three key points
https://economictimes.indiatimes.com/markets/stocks/news/what-do-aifs-want-in-this-budget-vivriti-asset-managements-ceo-lists-three-key-points/articleshow/89182360.cms Budget 2022: What does AIF want with this budget? Vivriti Asset Management CEO points out three key points