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Prudential Guidelines - Bank’s Investment in Venture Capital Funds (VCFs )

RBI /2006-2007/113
DBOD. No. BP. BC. 27/21.01.002/ 2006- 2007

August 23, 2006

The Chairman & Managing Directors
Chief Executive Officers of Commercial Banks
(excluding RRBs)

Dear Sirs,

Prudential Guidelines - Bank’s Investment in Venture Capital Funds (VCFs )

It is observed that the exposure of banks to Venture Capital Funds (VCFs) has been steadily increasing over the last few years. While significance of venture capital activities and need for banks’ involvement in financing of venture capital funds is well recognized, it is also considered important to address the relatively higher risks inherent in such exposures. In view of this, we have reviewed the entire issue of financing of VCFs and revised the prudential framework governing banks’ exposure to VCFs. Banks are advised to comply with the prudential requirements relating to financing of VCFs set out in the Annex.

2. Please acknowledge receipt.

Yours faithfully,

( Prashant Saran)
Chief General Manager-in-Charge


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