The Securities and Exchange Board of India (SEBI) has proposed the major reform for the country’s rapidly expanding Alternative Investment Fund (AIF) sector. SEBI has proposed the new initiative which called as GARUDA and it also plans to significantly reduce the time required for the launching of AIGs schemes. This proposal will aims to improve the ease of doing business and faster capital deployment.
What Is SEBI’s GARUDA Mechanism?
SEBI has introduced the proposal for GARUDA which stands for (Green-Channel: AIF Rollout Upon Document Acknowledgement).
This framework is designed to simplify and speed up the process of the launching of AIF schemes.
Currently the AIFs can launch their schemes only after waiting for the 30 days from the date of filing the Placement Memorandum (PPM) with regulator.
Under the newly proposed GARUDA system the eligible AIF schemes may be allowed to launch within just 10 working days unless the SEBI raises the any objections during the review period.
This proposal is expected to make the fundraising quicker and improve efficiency in India’s investment ecosystem.
Why SEBI Introduced GARUDA
The AIF industry in India has expanded rapidly over the last couple of years. According to SEBI, the number of registered AIFs increased from the 732 five years ago to 1,849 as of March 31, 2026.
The regulator also highlighted that,
- Total commitments raised by AIFs: ₹15.74 lakh crore
- Net investments made via AIFs: ₹6.45 lakh crore
This data are till the period of December 31, 2025.
Faster Launch for Accredited Investor Only Schemes
One of the most important aspects of the proposal is the relaxation for the Accredited Investor only (AI=only) schemes and Angel Funds.
Under the new framework,
- These schemes may no longer require the filing through a merchant banker.
- Also the fund managers can directly submit the PPM to SEBI.
- The filing must include the undertaking from the CEO and compliance officer.
- Such schemes may be allowed to launch immediately after filing
This change is expected to reduce the compliance burden and improve operational efficiency for fund managers.
Who Are Accredited Investors?
The accredited investors are individuals or entities that which meet the specific income or net worth criteria defined by SEBI. These investors are set to be considered financially sophisticated and capable of understanding higher risk investment products.
The number of accredited investors in India has grown sharply i the last years,
- April 2025: 649 accredited investors
- April 2026: 2,773 accredited investors
As per SEBI’s latest data, accredited investors held the AIF investments worth around ₹1.91 lakh crore which is accounting for nearly 30% of total AIF investments.
How GARUDA Could Benefit India’s Investment Market
The newly proposed GARUDA framework will bring several advantages to the financial sector.
- Faster Capital Deployment
- Ease of Doing Business
- Support for Startup Ecosystem
- Increased Investor Confidence
Sebi Will Continue Risk Monitoring
Although the process may become faster but on the other side SEBI has clarified that regulatory oversight will continue.
The regulator also plans to conduct post facto scrutiny of scheme documents based on risk assessment.
If any disclosure violations or irregularities are found, Sebi may initiate the regulatory action against the concerned entities.
About the Alternative Investment Funds (AIFs)
The Alternative Investment Funds (AIFs) are privately pooled investment vehicles which collect money from investors and invest in assets beyond traditional stocks and bonds.
AIFs in India are broadly classified into three categories,
Category I AIFs
These include,
- Venture Capital Funds
- Infrastructure Funds
- Startup Funds
Category II AIFs
These include,
- Private Equity Funds
- Debt Funds
Category III AIFs
These include,
- Hedge Funds
- Complex trading strategies
The AIFs have become increasingly important to financing the startups, infrastructure and emerging businesses in India.
Public Feedback Open Till June 1
Also SEBI has invited public comments on the GARUDA proposal until the June 1, 2026.
After the reviewing feedback from stakeholders the regulator may finalize and implement the framework.
The market experts believes that the proposal could become one of the most important reforms in the India’s alternative investment space in recent years.
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