Private Equity/venture capital activity is not a regulated activity per se. However, the issue of bank involvement with such funds has come into focus recently in India. The G30 recommends the large systemically important banking institutions should be restricted in undertaking proprietary activities that present high risks and serious conflicts of interest.
Sponsorship and management of co-mingled private pools of capital should ordinarily be prohibited and large proprietary trading should be limited by strict capital and liquidity requirements. Keeping in view the reputational risk involved in such activities, the Reserve Bank had mandated maintenance of certain level of economic capital in some of the cases approved in the recent past.