In India, now insurance firms would be able to invest in private equity and debt funds as the Insurance Regulatory and Development Authority (Irda) has allowed them (insurers) to invest in Alternative Investment Funds in Category-I and Category-II. Earlier, this was restricted to Category-I.    

Under Category II, at least 51 per cent of the funds of such AIF would be invested in infrastructure entities, small and medium enterprise (SME) entities, venture capital undertakings or social venture entities, the Irda stated its condition. Category I AIFs include venture capital funds, SME funds, social venture funds, infrastructure funds and other such AIFs as might be specified.    

Category II AIFs include private equity funds, debt funds, fund of funds and such other funds. These funds would be close ended, would not engage in leverage and would follow investment restrictions as prescribed for each category.