SEBI Rolls Out 'Green-Channel' for AIFs: Scheme Launch Process to Speed Up Dramatically

SEBI Rolls Out 'Green-Channel' for AIFs: Scheme Launch Process to Speed Up Dramatically​

SEBI has initiated a major overhaul of the Alternative Investment Funds (AIFs) operational framework by consulting on a 'Green-Channel' mechanism. The proposed overhaul, known as GARUDA, aims to significantly reduce the bureaucratic timeline for launching new AIF schemes. This move is designed to boost capital efficiency and sustain the rapid growth of the structured investment landscape.

The consultation paper, released on May 11, 2026, focuses on amending SEBI (AIF) Regulations, 2012, to facilitate faster capital deployment by AIFs across various investment categories.

Streamlining the AIF Scheme Launch Process​

The primary objective of the consultation is to address the friction points in the current scheme launch process. Historically, the filing of a Placement Memorandum (PPM) required SEBI's review and adherence to mandated timelines.

Under the proposed changes for Regular Schemes, the timeline for launching new schemes is set to drastically shorten. Instead of waiting for the previous standard of 30 days, AIFs may be allowed to launch new schemes after merely 10 working days of filing their application with SEBI, unless otherwise advised.

Furthermore, the first scheme launch for an AIF will benefit from greater flexibility, potentially allowing AIFs to proceed from the date of SEBI registration or after 10 working days, whichever is later.

Exemptions and Faster Track for Specific Fund Types​

SEBI is also proposing tailored relaxations for funds targeting sophisticated investor bases, specifically AI-only schemes and Angel Funds. The current reliance on Merchant Bankers is slated for replacement in these categories.

For AI only schemes, the Manager of the AIF would be permitted to file the PPM directly with SEBI, bypassing the need to file through a Merchant Banker. Correspondingly, the requirement for a Merchant Banker Due Diligence certificate would be replaced by a formal Undertaking from the Chief Executive Officer (CEO) and the Compliance Officer of the Manager.

Similar operational flexibility is proposed for Angel Funds. These funds would similarly benefit from the direct filing of the PPM by the Manager of the AIF. Crucially, for both AI only schemes and Angel Funds, the proposals advocate for immediate circulation of the PPM to investors from the date of SEBI registration.

Understanding the AIF Ecosystem and Growth Trajectory​

The proposed regulatory changes are underpinned by the exponential growth observed within the AIF industry. This growth validates the need for increased procedural speed.

As of March 31, 2026, the number of AIFs has reached 1849, marking a 135% increase compared to just 732 AIFs at the end of March 31, 2021. The sector’s financial footprint is vast, with cumulative commitments raised by AIFs amounting to INR 15.74 lakh crores.

The inflow of applications reflects this market dynamism. The data shows a massive surge in applications across the years, with the number of new scheme applications projected to reach 456 in FY 2026-27, up from 266 in FY 2025-26.

Key Regulatory Differences by Fund Type​

The regulatory model recognizes the varying degrees of investor sophistication across the market. The framework includes three main buckets of AIFs:

1. Large Value Funds for Accredited Investors (LVF): These schemes involve minimum investments of INR 25 Crore from Accredited Investors.
2. Accredited Investor Only Scheme (AI only): These funds receive capital exclusively from Accredited Investors.
3. Regular Schemes: These schemes primarily onboard investors based on a minimum investment amount of INR 1 crore.

The proposal for LVFs maintains a degree of deference to the formal filing process, while the immediate launch proposals are concentrated on the AI only schemes and Angel Funds due to their perceived high level of investor sophistication.

Expert Viewpoints and Global Comparatives​

The industry consultation confirms that international practices support a shift away from prolonged regulatory review. Stakeholders, including the Indian Venture & Alternate Capital Association (IVCA), have referenced practices in other jurisdictions.

It was noted that the IFSCA and Securities Commissions Malaysia have transitioned to a system where they conduct the primary scrutiny of scheme documents post-facto, sampling the review based on risk assessment. This global trend supports the move towards placing greater reliance on the due diligence undertakings provided by the AIF Manager itself.

Despite the proposed relaxation, SEBI maintains a critical safeguard. The regulator clarified that it will continue to carry out scrutiny of scheme documents post-facto on a sample basis, based on risk assessment and specific criteria. Any irregularity found in the PPM will hold the concerned entities liable for action.

The public is invited to submit their comments and suggestions on the outlined proposals via the SEBI portal by June 01, 2026.