Whalesbook
SEBI is proposing a new mechanism called GARUDA (Green-Channel: AIF Rollout Upon Document Acknowledgement) to significantly speed up the launch process for Alternative Investment Funds (AIFs) in India. The plan aims to reduce the current 30-day processing time for new AIF schemes to just 10 working days. This move is designed to unlock capital more quickly and support the rapid growth of the AIF industry.
Under the proposed GARUDA system, most AIF schemes could be launched just 10 working days after filing their placement memorandums (PPMs), provided SEBI has no objections. For an AIF's initial scheme, launch would be allowed either upon registration or 10 working days after filing, whichever date is later. This aims to accelerate capital deployment, a key goal as India's AIF sector has grown substantially. The number of registered AIFs more than doubled from 732 five years ago to 1,849 by March 31, 2026. Total commitments have reached ₹15.74 lakh crore, with ₹6.45 lakh crore invested as of December 31, 2025.
SEBI is also offering significant relaxations for funds focused solely on Accredited Investors (AI-only) and for Angel Funds. Fund managers for these categories will be able to file directly with SEBI, without needing a merchant banker and instead providing an undertaking. Crucially, these schemes could launch immediately after filing, skipping the usual review period. This acknowledges that accredited investors meet high income or net-worth thresholds and are considered capable of evaluating complex investments. The number of accredited investors has grown sharply, reaching 2,773 by April 30, 2026, up from 649 a year prior. These investors held AIF units worth about ₹1.91 lakh crore as of December 31, 2025, nearly 30% of total AIF investments. This tailored regulation mirrors a global trend to adapt oversight for sophisticated investors. The Indian AIF market is projected to reach ₹100 lakh crore by 2030, and SEBI's changes aim to lower regulatory hurdles to support this potential growth.
However, the accelerated timeline raises potential concerns. A faster launch window could mean less initial scrutiny by SEBI. While the regulator plans post-launch checks on a sample basis, quicker approvals might increase the risk of disclosure errors or misrepresentation by some fund managers. For AI-only and Angel Funds, the direct filing places greater responsibility on managers and investors to conduct thorough risk assessments. SEBI has previously intervened to address issues such as indirect access to benefits and loan evergreening within AIFs, highlighting the need for ongoing vigilance. These new measures, while intended to facilitate business, will require strong self-governance and careful post-approval checks to maintain market integrity and investor protection standards.
SEBI has opened the proposed changes for public comments until June 1, signaling a collaborative effort to finalize the reforms. Industry stakeholders expect these changes, alongside continued strong capital inflows into India's AIF sector, to further boost investment and innovation.