Insights into RBI’s strictures on private credit

In this edition of the State of Economy Podcast, businessline’s Hamsini Karthiktalks to Srinath Sridharan, author, policy researcher and corporate advisor, following up on the Reserve Bank of India’s new rules on bank investments in AIFs.

The podcast begins by discussing whether the RBI’s move is a step towards addressing concerns in private credit. The discussion delves into the potential impact on private credit funds, especially those associated with regulated entities.

Sridharan decodes RBI’s message, emphasising the central bank’s concerns about structures outside its regulatory regime and the need for mark-to-market valuations. The conversation highlights the rarity of the RBI explicitly expressing worries, particularly about evergreening practices.

Hamsini and Sridharan explore the potential consequences for banks and NBFCs. Sridharan notes the urgency conveyed by RBI, requiring entities to unwind certain structures within 30 days. The podcast touches upon the harshness of the circular and its potential implications for the financial sector.

The conversation takes an interesting turn as they discuss the entry of large family offices and wealthy individuals into the private credit market. Hamsini raises the question of whether these sophisticated investors are capable of understanding the risks involved in the high-yield private credit segment.

Towards the end of the podcast, the focus shifts to the responsibility of managing non-performing assets in the private credit market. Sridharan discusses the need for a joint ownership model and questions the suitability of current market participants, suggesting that a different breed of professionals may be required to manage this complex landscape.

(Host: Hamsini Karthik, Producer: Amitha Rajkumar, Siddharth Mathew Cherian) 

About the State of the Economy podcast 

India’s economy has been hailed as a bright spot amid the general gloom that seems to have enveloped the rest of the world. But several sectors continue to stutter even as others seem set to fire on all cylinders. To help you make sense of the bundle of contradictions that the country is, businessline brings you podcasts with experts ranging from finance and marketing to technology and start-ups 

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