Context: 

The Reserve Bank of India may relax the restriction imposed by the evergreening circular issued in December for some strategically important AIFs.

Strategic Important AIFs May Get Excluded From RBI’s Evergreening Rules

• The relaxations may come for: NIIF funds, SIDBI Fund of Funds, SBICap Venture’s Self Reliant India Fund (SRI) and SWAMIH Investment Fund (SIF) and any new funds that the government may launch in the future or considered as “strategically important”
• Equity funds are more likely to see the relaxation than the  debt funds.
• A cap on the exposure of an NBFC into an AIF may also be introduced: At present, there is No Cap to invest in AIF by an NBFCs and the RBI can mandate a cap of 10 per cent or higher 

Strategically Important AIFs

• These are the Alternate Investment Funds which are either instituted by the Government Of India for encouraging investments in specific sectors infrastructure requirements like National Investment and Infrastructure Fund or which are being subscribed and recognised by the government and its entities.

Evergreening of Loans

• It basically means issuing  new loans to help a stressed or delinquent borrower to  repay their old loans. 
  • The AIF route: The regulated lenders substituted their direct loan exposure to borrowers with indirect exposure through investments in AIFs with downstream investments in the same borrowers which led to,
    • Mounting Bad Debts: Artificial prolonging the life of such debts will pose a  significant threat to financial stability and transparency.
    • Wilful neglect:It will lead to delayed recognition of losses and will jeopardize the overall health of balance sheets.
    • Conflict of interest: Short-term benefits were prioritized over long-term financial stability.

News source: The HIndu  Business line