The Reserve Bank of India (RBI) initially proposed allowing banks and non-banking financial companies (NBFCs) to invest up to 15% of their funds in Alternative Investment Funds (AIFs), a move welcomed by venture capitalists. However, the RBI later revised this proposal, capping the investment limit at 10%. This adjustment represents a regulatory U-turn aimed at balancing market growth with risk management. Additionally, the RBI is considering implementing a stricter dividend distribution framework for banks following stakeholder feedback. These regulatory changes come amid broader market developments, including concerns over the impact of a rate hike in Japan on Indian markets and financial performance reviews of institutions like LIC Housing Finance. The RBI’s easing of AIF investment rules provides financial institutions with clearer guidelines and some relief, while banks are also reportedly cutting deposit rates in response to market conditions.