Investment In Venture Capital Funds By Banks

It is a known fact that money that banks have received from the customer will be invested by them in various securities. The securities are invested in various ratios. The Reserve Bank of India has, through its Master Circular dated August 25, 2021^[1], specified the ratios in which the banks can make investments in various securities. The circular is subject to amendments regularly as required by banks.

Recently, the Reserve Bank of India, through its notification dated March 23^rd 2022^[2], made an amendment regarding the ratio of investment vis-à-vis the investment in venture capital funds by banks. After discussion, it was decided that the investment ratio in the venture capital funds will be treated in the same manner as it is treated for Alternative Investment Funds Categories II and III.

The amendment thus provides an opportunity for banks to invest in venture capital funds. This in turn encourages the growth of businesses and entrepreneurship ventures as a whole.

¹ https://rbi.org.in/Scripts/BS_ViewMasDirections.aspx?id=12153

² https://www.rbi.org.in/scripts/NotificationUser.aspx?Id=12258&Mode=0

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