New Framework Aims To Reduce Compliance Burden And Improve Ease Of Doing Business
The Securities and Exchange Board of India (SEBI) has approved a new framework called GARUDA to accelerate the launch of Alternative Investment Fund (AIF) schemes and simplify regulatory compliance for funds catering to sophisticated investors.
GARUDA, which stands for Green Channel: AIF Rollout Upon Document Acknowledgement, introduces a streamlined approval mechanism that allows certain categories of AIF schemes to launch significantly faster than before. The move is expected to benefit venture capital funds, private equity firms, angel investors, and other alternative investment vehicles operating in India.
What Is The GARUDA Framework?
Under the newly approved framework, SEBI has classified AIF schemes into four categories: Large Value Funds (LVFs), Accredited Investor (AI)-only Schemes, Angel Funds, and Regular Schemes.
Large Value Funds will continue to be restricted to accredited investors, with each investor required to commit a minimum of Rs 25 crore. AI-only schemes and Angel Funds will also be available exclusively to accredited investors, although AI-only schemes will not have a minimum investment threshold requirement.
The regulator’s objective is to create a differentiated regulatory structure that reflects the sophistication and risk-bearing capacity of investors participating in these funds.
How Will GARUDA Speed Up Fund Launches?
One of the most significant changes introduced under GARUDA is the removal of the mandatory merchant banker certification requirement for AI-only schemes and Angel Funds.
Previously, AIF schemes were required to submit Placement Memorandums (PPMs) through SEBI registered merchant bankers, a process that typically took around 30 days. Under the new framework, fund managers and designated officers can self certify compliance with AIF regulations and applicable laws.
As a result, AI only schemes and Angel Funds can be launched immediately after receiving document acknowledgement from SEBI. This substantially reduces the time required to bring new investment products to market.
For Regular Schemes, the merchant banker certification requirement remains in place. However, the launch timeline has been shortened to 10 working days, offering faster approvals compared to the earlier process.
Greater Accountability For Fund Managers
SEBI has shifted greater responsibility onto fund managers and designated officials for AI-only schemes and Angel Funds.
Under GARUDA, these individuals will be directly accountable for ensuring that all disclosures, regulatory filings, and compliance requirements are accurate and complete.
For Regular Schemes, merchant bankers and AIF managers will continue to share responsibility for the quality and accuracy of disclosures submitted to the regulator.
The framework seeks to balance faster approvals with stronger accountability mechanisms, ensuring investor protection remains intact while reducing administrative bottlenecks.
What Does This Mean For The Alternative Investment Industry?
Industry participants are expected to benefit from lower compliance costs, reduced paperwork, and faster fund launches. Venture capital funds, private equity managers, angel investment platforms, and startup-focused investment vehicles are likely to see the biggest advantages under the new system.
By introducing a green channel approval process for accredited investor-focused funds, SEBI aims to enhance India’s attractiveness as an investment destination while promoting innovation in alternative asset management.
The regulator believes the framework will improve ease of doing business, encourage capital formation, and strengthen the overall AIF ecosystem.
What Happens Next?
While SEBI has approved the GARUDA framework, the Gazette notification for the amended AIF Regulations is still awaited. Certain provisions of the framework may become operational only after the formal notification is issued.
Once implemented, GARUDA is expected to significantly modernize India’s alternative investment landscape by combining quicker approvals with stronger governance and accountability standards.
