How much can a lender invest in an alternative investment fund?
The limits, and what is cut from capital.
Short answer. A single lender cannot put more than 10 per cent into one scheme, and all regulated lenders together cannot hold more than 20 per cent of it. A holding in subordinated units is deducted from capital in full.
The rule, lender by lender
| Kind of lender | What the rule says |
|---|---|
| Commercial bank | A lender alone cannot put more than ten per cent into an alternative investment fund. Read the rule |
| Finance company | A lender alone cannot put more than ten per cent into an alternative investment fund. Read the rule |
| Urban co-operative bank | A lender alone cannot put more than ten per cent into an alternative investment fund. Read the rule |
| Rural co-operative bank | A lender alone cannot put more than ten per cent into an alternative investment fund. Read the rule |
| Regional rural bank | A lender alone cannot put more than ten per cent into an alternative investment fund. Read the rule |
| All India financial institution | A lender alone cannot put more than ten per cent into an alternative investment fund. Read the rule |
What else the rule says
- All regulated lenders together cannot hold more than twenty per cent of a fund. · source
- A holding in subordinated units of such a fund is deducted from capital in full. · source
- A bank cannot invest in the corpus of a Category III alternative investment fund. · source
- With prior approval a bank group may hold up to thirty per cent of such a fund. · source
- Fund investments must not be used to get round rules that bind the bank directly. · source
- The investment policy must carry provisions on investing in such funds. · source
- The Reserve Bank may exempt named funds from these rules by notification. · source
Where this comes from
- Reserve Bank of India (Commercial Banks - Undertaking of Financial Services) Directions, 2025
- Reserve Bank of India (Non-Banking Financial Companies – Undertaking of Financial Services) Directions, 2025 (Updated as on July 01, 2026)
- Reserve Bank of India (Urban Co-operative Banks – Undertaking of Financial Services) Directions, 2025 (Updated as on April 27, 2026)
- Reserve Bank of India (Rural Co-operative Banks – Undertaking of Financial Services) Directions, 2025 (Updated as on April 27, 2026)
- Reserve Bank of India (Regional Rural Banks – Undertaking of Financial Services) Directions, 2025 (Updated as on April 27, 2026)
- Reserve Bank of India (All India Financial Institutions – Undertaking of Financial Services) Directions, 2025 (Updated as on April 27, 2026)
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Plain-language summary, not the official text. Not legal advice. Every line above is a point published on the rule page it links to. · Report a mistake