The framework is designed to facilitate blended finance and other fund structures, allowing investors with different risk and return preferences to participate in the same scheme.

🔹 What can Fund Managers now structure?

Eligible schemes can issue:

• Senior units
• Junior units
• Subordinate units

Senior units cannot differ in terms of risk, priority of returns or loss absorption, although they may differ in fees, currency and other operational aspects.

Junior or subordinate investors may, subject to the framework:

➡️ Bear portfolio losses beyond their pro-rata share
➡️ Accept lower financial returns
➡️ Accept zero financial returns
➡️ In certain ESG structures, provide grants to the scheme.

🌱 Blended Finance & ESG

The framework specifically provides for grants to ESG Schemes, with aggregate grants capped at 49% of the scheme corpus.

Grants can be linked to a separate class of “social units” or accepted without issuance of such units, subject to appropriate disclosure in the PPM.

Importantly, grants must be separately accounted for in the scheme’s audited annual financial statements, and the FME must maintain a written policy covering their acceptance, administration and deployment.

💰 Minimum investment

For junior/subordinate units:

USD 2 million — standard minimum investment
USD 1 million — for accredited investors
No minimum investment — for grants.

📄 PPM disclosures become critical

The PPM must prominently disclose:

• Rights attached to each class of units
• Distribution waterfalls
• Redemption and winding-up distributions
• Scenarios involving loss of capital
• Additional risks associated with each class
• Applicable conversion milestones and triggers.

What this means for IFSC Fund Managers

The framework creates a regulatory structure for designing funds where different investors can take different levels of risk and return within the same scheme.

For blended finance structures, this can allow concessional/philanthropic capital to absorb greater risk while commercial investors participate through a different class of units.

Effective immediately.

📌 Source: IFSCA Circular — September 25, 2026

The newly specified jurisdictions are:

🇦🇪 UAE
🇸🇬 Singapore
🇦🇺 Australia
🇪🇺 European Union

However, these jurisdictions are subject to an important condition: they must not be identified by FATF as High-Risk Jurisdictions subject to a Call for Action or under Increased Monitoring, or be classified as high-risk by the Central Government for money laundering, terrorist financing or proliferation financing.

A key clarification for IFSC fund managers

IFSCA has also clarified that the term “jurisdiction” refers to the jurisdiction of domicile of the capital market product or service, rather than the jurisdiction where the entity managing that product or service is located.

The amendment is effective immediately from September 18, 2026.

For Fund Management Entities, distributors and other IFSC ecosystem participants, this clarification is relevant when assessing cross-border distribution structures and applicable jurisdictional requirements.

Source: IFSCA Circular dated September 18, 2026.

The Securities and Exchange Board of India (SEBI), at its 215th Board Meeting held on September 24, 2026, approved several regulatory reforms aimed at strengthening investor protection, simplifying compliance, and expanding participation in India’s alternative investment ecosystem.

Among the key decisions are amendments to the SEBI (Alternative Investment Funds) Regulations, 2012, and significant changes to the Accredited Investor framework.

These reforms could influence how AIF managers structure investor onboarding, manage regulatory compliance, and facilitate capital mobilisation.

1. Enhanced Investor Protection Extended to All AIF Structures

One of the most significant AIF-related decisions concerns the extension of investor protection provisions currently applicable to trust-structured AIFs.

What has changed?

Under the existing framework applicable to AIFs constituted as trusts, the Fund Manager or its officers cannot use the trust’s assets to pay for their own losses, damages, or expenses, including costs associated with resolving investor disputes.

SEBI has approved amendments to extend this protection to AIFs of all legal structures, irrespective of the form in which they are established.

Impact on AIFs and Fund Managers

The amendment reinforces the principle that fund assets must be protected from liabilities arising from the personal actions or obligations of fund managers and their officers.

Fund managers should review:

• Fund constitutional documents and governing agreements.

• Indemnity and expense-reimbursement provisions.

• Policies governing the use of fund assets.

• Internal controls for related expenses and investor disputes.

The objective is to ensure consistent investor protection across different AIF structures.

2. Accredited Investor Framework Expanded to Facilitate Capital Formation

SEBI has approved several changes to the Accredited Investor (AccI) framework to simplify accreditation and expand the pool of eligible sophisticated investors.

These changes are particularly relevant for AIF managers targeting high-net-worth individuals, family offices, institutional investors, and overseas investors.

Manager-Led Investor Accreditation

Under the approved framework, AIF Managers will be permitted to accredit investors as an additional and optional route.

The existing accreditation agency route will continue.

This means eligible AIF managers may be able to integrate investor accreditation into their onboarding workflows rather than requiring investors to complete a separate accreditation process through an external agency.

Potential Benefits for AIF Managers

Manager-led accreditation could:

• Reduce duplication in investor verification.

• Streamline investor onboarding.

• Reduce time and administrative costs.

• Improve the integration of accreditation with subscription and KYC workflows.

For fund managers operating multiple investment products, this could create opportunities for a more unified investor onboarding experience.

3. Securities Market Exposure Introduced as an Accreditation Criterion

SEBI has approved securities market exposure as an additional eligibility criterion for Accredited Investor status.

The approved thresholds are:

This provides an additional, digitally verifiable route for qualifying as an Accredited Investor.

Why This Matters for AIFs

The introduction of an investment-exposure criterion may broaden the pool of investors eligible to participate in products designed for sophisticated investors.

AIF managers may benefit from:

• A larger potential accredited investor base.

• More efficient verification using financial data.

• Better targeting of sophisticated investors.

• Reduced dependence on traditional income and net-worth-based assessment alone.

The change may also encourage technology-enabled verification systems that can validate securities market holdings and maintain supporting records.

4. Deemed Accreditation for Non-Residents

SEBI has also approved deemed Accredited Investor status for Persons Resident Outside India, as defined under FEMA, including Foreign Portfolio Investors.

Implications for AIF Fundraising

This measure is intended to ease access for sophisticated overseas investors to eligible Indian securities market products and facilitate foreign capital inflows.

For AIF managers, the development could support:

• More efficient onboarding of eligible overseas investors.

• Expansion of international fundraising initiatives.

• Simplified accreditation-related processes for qualifying non-resident investors.

However, applicable FEMA, tax, AML/KYC, and other regulatory requirements will continue to require careful consideration.

5. LLPs Eligible for Accredited Investor Status

SEBI has approved eligibility for Limited Liability Partnerships (LLPs) to obtain Accredited Investor status where each partner is an Accredited Investor, in line with the existing framework for partnership firms.

This is relevant to investment structures involving family offices, investment partnerships, and professional investment vehicles.

AIF managers may need to consider how this eligibility change affects investor classification and onboarding documentation for LLP-based investors.

6. Three-Year Validity and Portability Within the Same Group

Under the approved framework:

• Accreditation through either the manager-led or Accreditation Agency route will be valid for three years.

• Manager-led accreditation will be portable across AIF, Specialized Investment Fund (SIF), and PMS products within the same group, subject to appropriate safeguards.

Operational Impact

This could reduce repetitive accreditation checks when an investor participates in multiple eligible products managed by the same financial group.

Fund managers operating multiple AIF schemes or diversified investment platforms may benefit from a more consistent investor verification framework.

Appropriate safeguards and implementation requirements will remain important.

7. What AIF Managers Should Prepare For

Although the Board has approved these proposals, the operational framework will depend on the subsequent regulatory amendments, notifications, and implementation directions.

AIF managers should begin evaluating the following areas:

Investor Onboarding Systems

Can your onboarding platform support:

• Manager-led accreditation workflows.

• Securities market exposure verification.

• Accreditation validity tracking.

• Documentation and audit trails.

Fund Documentation

Review whether investor agreements, subscription documents, and internal policies will need updates once the amendments are notified.

Conclusion

SEBI’s September 24, 2026 Board decisions signal continued efforts to modernise India’s alternative investment regulatory framework while strengthening investor protection and facilitating capital formation.

For AIF managers, the proposed Accredited Investor reforms could simplify onboarding, expand access to sophisticated investors, and reduce duplication across investment products.

At the same time, extending investor asset protection across all AIF legal structures reinforces the importance of robust governance and compliance controls.

Under the circular, IFSCA may now consider extending the validity of an expired Placement Memorandum, even where the application for extension is filed after the expiry of its validity period.

Key highlights:

🔹 Expired PPMs can now potentially be extended
FMEs can apply for an extension even after the validity of the Placement Memorandum has expired.

🔹 Extension fees and late fees apply
The application must be accompanied by the prescribed extension fee and late fee, with the fee structure linked to the applicable fee for filing a fresh scheme.

🔹 No material changes permitted
The scheme cannot undergo material changes to its name, investment objective, investment strategy, structure, category or nature. Any such change would require filing a fresh Placement Memorandum.

🔹 Multiple six-month periods may be considered
Where the application is made after a longer period of expiry, IFSCA may grant an extension covering additional six-month blocks, subject to applicable fees.

⚠️ Important: The extension does not prejudice IFSCA’s right to take action for regulatory non-compliance during the period in which the Placement Memorandum remained expired.

This is a significant development for FMEs managing Venture Capital Schemes and Restricted Schemes in IFSC, providing a mechanism to address situations where a PPM has expired while also maintaining regulatory accountability.

📄 Circular: Extension of validity of expired Placement Memorandum – Reg.
Issued by IFSCA on September 11, 2026, with immediate effect.

SEBI has extended the timeline for certain existing Angel Funds to transition to the mandatory Accredited Investor framework.

Under the revised regulatory framework for Angel Funds, SEBI had introduced an Accredited Investor mandate for Angel Funds. Angel Funds registered after September 10, 2025 are required to onboard and offer investment opportunities exclusively to Accredited Investors.

For Angel Funds registered with SEBI on or before September 10, 2025, a transitional period had originally been provided until September 8, 2026.

What has changed?

Based on representations received from the AIF industry, SEBI has now extended the transition timeline until March 31, 2027.

Accordingly, Angel Funds registered on or before September 10, 2025 must comply with the following:

1. Implementation of Accredited Investor mandate

Such Angel Funds must implement the Accredited Investor mandate on or before March 31, 2027.

During the transition period, they must not offer investment opportunities to more than 200 non-Accredited Investors.

2. Contributions from non-Accredited Investors

From April 1, 2027, such Angel Funds will not be permitted to accept contributions for investment in an investee company from non-Accredited Investors.

3. Existing investments remain unaffected

Existing investors may continue to hold investments already made in the Angel Fund in accordance with the terms of the Fund’s PPM and/or other fund documents.

Effective Date

The circular has come into effect immediately. All other provisions of Chapter 8 of the SEBI Master Circular for AIFs remain unchanged.

What does this mean for Angel Fund Managers?

The extension provides existing Angel Funds with additional time to:

• Transition their investor onboarding processes.

• Put in place systems for Accredited Investor verification.

• Review existing investor and contribution structures.

• Update internal compliance and operational processes.

• Prepare for a complete transition to the Accredited Investor framework by March 31, 2027.

Key takeaway: Existing Angel Funds registered on or before September 10, 2025 now have an additional transition period until March 31, 2027 to comply with the Accredited Investor mandate.

For AIFs, this is particularly relevant because AIFs are expressly included among the entities covered by the circular.

What changes?

🔹 6-hour reporting: Cyber incidents must be reported to SEBI through the prescribed email channel within 6 hours.

🔹 24-hour portal reporting: The incident must also be reported through SEBI’s Cyber Incident Reporting Portal within 24 hours.

🔹 FIRE-based reporting: SEBI’s portal is now aligned with the FSB FIRE framework, introducing common information fields, standardised definitions and consistent incident classifications.

🔹 Reporting is ongoing: Reporting is not simply a one-time exercise. The portal supports initial reporting, subsequent updates and final closure as the incident progresses.

What does this mean for AIF Managers?

AIFs and their technology/service providers should ensure that there is a clear cyber-incident response and reporting workflow, with defined ownership, escalation mechanisms and the ability to capture the information required for SEBI reporting within the prescribed timelines.

The circular also requires regulated entities to put systems in place for implementation and to consider necessary changes to relevant rules, regulations or bye-laws where applicable.

For AIFs, cybersecurity is no longer only an IT issue — it is a regulatory reporting and governance issue.

SEBI has taken an important step towards simplifying KYC processes for financial entities operating in GIFT City.

Through its circular dated August 20, 2026, SEBI has formally specified the International Financial Services Centres Authority (IFSCA) under Regulation 16A(1) of the SEBI KYC Registration Agency (KRA) Regulations, 2011.

This enables entities regulated by IFSCA to access the systems of SEBI-registered KYC Registration Agencies (KRAs) for undertaking KYC of their clients.

What has SEBI changed?

Regulation 16A(1) of the SEBI KRA Regulations allows entities regulated by other financial-sector regulators, when specified by SEBI, to access KRA systems for undertaking KYC of their clients.

SEBI has now specifically included IFSCA within this framework.

The immediate effect is that there can now be interoperability and information sharing between:

SEBI-registered KRAs ↔ IFSCA-regulated entities

This is particularly relevant for the growing ecosystem of funds, investment managers, financial institutions and other regulated entities operating from GIFT City / IFSC.

What does this mean for GIFT City investors?

An IFSCA-regulated entity can potentially use information already maintained within the SEBI KRA ecosystem when undertaking KYC of its clients.

This is significant because KYC information does not necessarily need to be treated as an entirely separate data set merely because the financial service is being provided from an IFSC.

For businesses building onboarding infrastructure for GIFT City, this creates the foundation for a more connected KYC workflow between the domestic securities-market KRA ecosystem and the IFSC ecosystem.

What about KYC compliance?

The circular is not simply an access permission.

SEBI has specifically stated that entities accessing the KRA system will be subject to the applicable provisions of the SEBI KRA Regulations. They must also follow SEBI’s Master Circular on Know Your Client (KYC) norms for the securities market, as amended from time to time.

Therefore, access to KRA data comes with corresponding compliance responsibilities.

For clients registered as Foreign Portfolio Investors (FPIs), additional data-security requirements under SEBI’s Master Circular dated May 30, 2024, also apply.

Why this matters for AIFs and fund managers

The development is particularly relevant for fund managers and investment platforms that operate across India and GIFT City.

A typical onboarding ecosystem may involve:

Investor → Fund / Manager → KYC → KRA → AML / Compliance → Investment

With the new framework, an IFSCA-regulated entity can be connected to the existing SEBI KRA infrastructure rather than operating in complete isolation.

This could help reduce:

• Repetitive KYC data collection

• Manual verification

• Duplicate onboarding processes

• Friction when investors move between regulated financial services

• Operational complexity for fund administrators and compliance teams

However, the circular itself establishes the regulatory interoperability framework. It does not prescribe a particular API, commercial arrangement, onboarding process or technical implementation between an IFSCA-regulated entity and a particular KRA.

Those implementation details will therefore remain important for firms building actual onboarding workflows.

A bigger implication for GIFT City

This circular is more than a technical KYC change.

One of the challenges in building GIFT City into a globally competitive financial centre is ensuring that regulated financial infrastructure can interact efficiently with India’s existing financial ecosystem.

Allowing IFSCA-regulated entities to access SEBI KRA systems is a step towards that interoperability.

For fintech and fund-operations platforms, it also opens up the possibility of building a single KYC workflow spanning SEBI-regulated and IFSCA-regulated businesses, subject to the applicable regulatory and access requirements.

Effective immediately

SEBI has stated that the circular comes into force with immediate effect.

The takeaway

SEBI has effectively created the regulatory bridge for KRA information sharing between India’s SEBI-regulated KYC ecosystem and entities regulated by IFSCA.

For GIFT City funds, investment managers and financial institutions, the next important question is no longer just whether KRA information can be accessed — but how the operational and technical connectivity will be implemented in practice.

This could become an important building block for streamlined investor onboarding in the IFSC ecosystem.

Source: SEBI Circular HO/38/15/(7)2026-MIRSD-POD/I/19255/2026 dated August 20, 2026.

SEBI has taken another step towards simplifying and digitising the onboarding of Foreign Portfolio Investors (FPIs).

Through its circular dated August 20, 2026, SEBI has permitted FPIs to execute a Power of Attorney (PoA) in favour of their custodians using a digital signature, in accordance with the Information Technology Act, 2000.

The change removes the requirement for such digitally executed PoAs to undergo notarisation, apostillisation or consularisation.

What has changed?

Under the earlier requirement, the Power of Attorney given by an FPI to its custodian, specifying the address, was required to be duly notarised and/or apostilled or consularised.

SEBI has now modified this requirement to provide an additional route:

A Power of Attorney given by an FPI to its custodian specifying the address may be executed using a digital signature in accordance with the Information Technology Act, 2000.

The existing notarised/apostilled/consularised route continues to be available. The new digitally signed route is therefore an additional option, rather than a replacement of the existing process.

Why is this important?

The change is aimed at making FPI onboarding faster and more digital.

Cross-border execution of legal documents can often involve additional steps such as:

• Notarisation

• Apostillisation

• Consularisation

• Physical document movement

• Coordination with overseas legal professionals

SEBI has specifically stated that the change will eliminate the need for notarisation, apostillisation or consularisation of the Power of Attorney, thereby reducing the overall time involved in FPI onboarding and improving ease of doing business for FPI applicants.

Part of SEBI’s broader FPI digitisation journey

The circular places this change within SEBI’s broader effort to streamline and digitise the FPI registration process.

SEBI has previously introduced measures including:

• The Common Application Form (CAF) for FPI registration

• PAN, bank and demat account processes

• Use of Indian digital signatures for CAF and other registration documents

• Digital signature functionality within the CAF portal

• Registration based on scanned copies of documents

The digitally signed PoA is another step in that progression.

Effective from August 20, 2026

The circular is effective immediately from August 20, 2026.

It modifies Para 9(B)(iv) of Part B of the FPI Master Circular relating to the Power of Attorney given by an FPI to its custodian.

What does this mean for FPI onboarding?

For an FPI choosing to use the digital route, the process can now be significantly more streamlined:

FPI → Digitally signs PoA → Custodian → FPI onboarding

Instead of:

FPI → Notarisation → Apostille/Consularisation → Physical/document processing → Custodian

This should be particularly relevant for overseas investors seeking to enter the Indian securities market without the administrative delays associated with execution and legalisation of physical documents.

What intermediaries should note

The circular is addressed not only to FPIs but also to:

• Designated Depository Participants (DDPs)

• Custodians

• Registrars and Transfer Agents

• Depositories

• Stock Exchanges and Clearing Corporations

• SEBI-registered intermediaries

Accordingly, onboarding workflows and document checklists maintained by relevant intermediaries should account for the newly permitted digitally signed PoA route.

A small regulatory change with a meaningful operational impact

The circular is only two pages long, but its operational impact is straightforward: SEBI is continuing to move FPI onboarding away from physical and jurisdiction-specific document formalities towards digitally executable documentation.

For global investors, this can reduce turnaround time and administrative friction.

For custodians and onboarding platforms, it also means that digital signature verification and document workflow capabilities become increasingly important components of the FPI onboarding stack.

Key takeaway

SEBI has not abolished the traditional notarisation/apostille route. It has added a digitally signed PoA route as an alternative.

Effective August 20, 2026, an FPI can provide a Power of Attorney to its custodian, specifying the address, executed using a digital signature compliant with the Information Technology Act, 2000.

This is another incremental but important step towards fully digital, faster and more frictionless foreign investor onboarding in India.

Source: SEBI Circular HO/19/34/14(8)2026-AFD-POD2/I/19251/2026 dated August 20, 2026.

The proposed framework could make it substantially easier for overseas investors to complete KYC and participate in India’s securities market without having to be physically present in India.

For Indian Alternative Investment Funds (AIFs), the proposal could have an important operational impact, particularly when onboarding overseas Limited Partners (LPs).

What Has SEBI Proposed?

SEBI issued a consultation paper on 14 August 2026 titled “Review of Know Your Client process for individual Persons Resident Outside India.”

The consultation paper proposes allowing individual Persons Resident Outside India (PROIs) to complete digital KYC while located outside India, provided they are in a FATF-compliant country.

Currently, digital onboarding of non-resident clients requires the client to be physically present in India. This has created significant friction for overseas investors, who may otherwise have to rely on physical documentation, courier services, notarisation and other offline processes.

SEBI is now proposing to remove this India-presence requirement for eligible PROI clients.

Who Does the Proposal Cover?

For the purpose of the consultation paper, individual PROI clients include:

• Non-Resident Indians (NRIs)

• Overseas Citizens of India (OCIs)

• Foreign nationals located outside India

The proposal is specifically focused on simplifying their KYC and digital onboarding process.

Foreign nationals seeking registration as a Foreign Portfolio Investor (FPI) would continue to be governed by the applicable FPI framework.

What Will Change Under the Proposed Framework?

1. Digital KYC From Outside India

The most significant proposed change is that an eligible PROI investor would no longer need to be physically present in India to complete digital KYC.

The intermediary would be permitted to accept KYC records and related documents digitally from a client located in a FATF-compliant country.

This could remove one of the biggest barriers to fully digital onboarding of overseas investors.

2. Electronic Signing of KYC Documents

The proposal allows the KYC form to be submitted through physical or digital channels.

The intermediary could accept:

• An original physical KYC form

• A scanned copy of a physical form under electronic signature

• A digital KYC form under electronic signature

For specimen signatures, the investor could provide a cropped image of the signature electronically. During Video In-Person Verification (VIPV), the investor would then provide a wet signature, which the intermediary would verify against the submitted specimen signature.

3. Video In-Person Verification From Overseas

SEBI proposes allowing Video In-Person Verification (VIPV) for PROI clients located outside India.

However, this would not simply be a standard video call.

The proposed process includes several safeguards, including:

• Client consent recorded in an auditable and alteration-proof manner

• Random actions to establish that the interaction is live

• Live GPS coordinates and timestamp

• Protection against spoofed IP addresses, VPNs and proxy servers

• Clear capture of the client’s photograph

• Face-liveness and spoof detection

• End-to-end encryption

• Verification by an authorised official of the intermediary

• Concurrent audit of the VIPV process

The client’s IP address would also need to originate from India or a FATF-compliant country and correspond with the country declared in the KYC documentation.

4. Greater Flexibility Around Overseas Addresses

The proposal also addresses the practical difficulty of verifying the current overseas address of a PROI.

Where an officially valid document can be verified through an official or source database, but the investor wants to provide a different current address, the investor may be permitted to provide a self-declaration of the current address.

This could simplify onboarding where the address on a passport or other officially valid document is not the investor’s current residential address.

5. Foreign Mobile Numbers

Verification of foreign mobile numbers can be difficult and costly for intermediaries, particularly where OTP-based verification is involved.

Under the proposed framework, the intermediary would collect the investor’s mobile number and email address. The mobile number would be verified if feasible, while the email address would also be verified through OTP or another verifiable mechanism.

This is particularly relevant for overseas investors who do not maintain an Indian mobile number.

KYC Portability Could Become Much More Important

Another important proposal relates to KYC portability.

SEBI proposes that KYC records for individual PROIs should be treated as portable.

Individual attributes within the KYC record would be tagged as “validated” where they have been verified against official or source databases.

This could reduce the need for an overseas investor to repeatedly submit the same KYC information when approaching different intermediaries.

For investors who interact with multiple financial institutions, brokers, fund managers or other regulated intermediaries, this could significantly reduce repetitive onboarding.

Greater Reliance on Existing KYC

The proposed framework would also allow an intermediary to rely on KYC undertaken by:

• Another SEBI-registered intermediary; or

• An entity regulated by another financial-sector regulator,

based on records obtained through the KRA/CKYCRR framework.

However, the intermediary would continue to have ultimate responsibility for the KYC of its own clients and would be required to undertake enhanced KYC measures where appropriate based on the client’s risk profile.

What Does This Mean for AIFs?

This proposal could be particularly relevant for India’s AIF industry.

Indian AIFs regularly onboard investors who are based outside India, including NRIs, OCIs and other eligible foreign investors.

Historically, overseas investor onboarding can involve multiple steps, including:

KYC documentation → notarisation/certification → courier → document verification → IPV → KRA registration → AML checks → subscription documentation

The proposed framework could allow much of this process to move towards a completely digital workflow.

For an AIF manager, the future onboarding journey could look more like:

Investor Registration → PAN/Passport → Digital KYC → Electronic Signature → Address Verification → FATF Country Check → VIPV → Liveness/Anti-Spoofing → AML Screening → KRA/CKYCRR → Subscription Documentation → Investor Onboarded

This could significantly reduce onboarding time and operational friction for overseas LPs.

What AIF Managers Should Prepare For

Although the proposal is not yet a final regulatory requirement, AIF managers and fund administrators should start evaluating whether their investor onboarding infrastructure can support the proposed model.

Key areas include:

1. Digital Overseas KYC

The onboarding platform should be capable of collecting KYC information and supporting documents digitally from investors located outside India.

2. FATF Country Screening

The investor’s country of residence would become an important part of the onboarding decision.

3. Video KYC / VIPV

A robust VIPV workflow will need to support liveness detection, GPS capture, anti-spoofing and appropriate audit trails.

4. KRA and CKYCRR Integration

The proposed portability framework makes integration with KRA and CKYCRR increasingly important for efficient investor onboarding.

5. AML and Risk Assessment

Digital onboarding does not remove the intermediary’s responsibility for KYC, AML or risk-based due diligence.

The proposed framework specifically retains the intermediary’s ultimate responsibility for KYC and allows enhanced KYC measures based on the investor’s risk profile.

6. Cybersecurity and Auditability

SEBI’s draft framework states that the infrastructure used for KYC must comply with the Cyber Security and Cyber Resilience Framework (CSCRF) applicable to SEBI-regulated entities.

Therefore, digital KYC should not be treated simply as a front-end video onboarding feature. The underlying infrastructure, security controls, audit logs and data protection mechanisms will also be important.

Why This Matters for the Indian AIF Ecosystem

The proposed changes come at a time when India’s investment ecosystem is becoming increasingly global.

Indian fund managers increasingly interact with investors who may be based in the US, UK, Singapore, UAE, Europe and other jurisdictions.

For these investors, the ability to complete KYC digitally from their country of residence could remove a significant operational barrier.

For AIF managers, this could mean:

• Faster LP onboarding

• Lower documentation and courier costs

• Less manual intervention

• Better investor experience

• Greater KYC portability

• More efficient fund administration

• A more scalable digital onboarding process

The change could therefore be more than just a KYC simplification. It could contribute to the broader digitisation of India’s private capital ecosystem.

What Happens Next?

This is currently a SEBI consultation paper and proposed framework, not a final regulatory requirement.

SEBI has invited public comments on the proposal, including whether digital onboarding should be permitted for PROI clients located in FATF-compliant countries and whether additional safeguards should be introduced for VIPV.

The deadline for submitting comments is 4 September 2026.

Once the final circular is issued, the proposed framework states that the provisions would come into effect 30 days after the date of issue.

Conclusion

SEBI’s proposal to simplify KYC for NRIs, OCIs and foreign nationals could materially improve the experience of overseas investors participating in India’s securities market.

For AIFs, the potential impact is particularly significant.

If implemented substantially as proposed, fund managers could move towards a more seamless digital LP onboarding experience, combining KYC, document verification, video verification, AML screening, KRA/CKYCRR checks and subscription documentation into a single technology-enabled workflow.

For an industry increasingly dependent on global capital, this is a welcome step towards making India’s private investment ecosystem easier to access from anywhere in the world.

AIF managers, fund administrators and technology providers should closely monitor the final SEBI circular and begin evaluating their existing investor onboarding processes against the proposed framework.

Disclaimer: This article is based on SEBI’s consultation paper dated 14 August 2026 and describes proposals that are subject to the consultation process. It should not be treated as legal or regulatory advice.

Source: Securities and Exchange Board of India (SEBI), Consultation Paper – Review of Know Your Client process for individual Persons Resident Outside India, issued 14 August 2026.

Source: https://www.sebi.gov.in/reports-and-statistics/reports/aug-2026/consultation-paper-on-review-of-accredited-investor-framework_103550.html

SEBI’s latest Consultation Paper on the Review of the Accredited Investor (AI) Framework could significantly change how Accredited Investors are identified and onboarded in India.

And, frankly, the biggest change is not just about thresholds.

It is about who gets to decide whether an investor is an Accredited Investor.

Under the existing framework, an investor generally approaches an independent Accreditation Agency, gets their financial eligibility verified, obtains an Accreditation Certificate, and then approaches the relevant fund manager or intermediary.

SEBI is now proposing a much more streamlined approach.

The Big Change: Fund Managers May Be Able to Accredit Investors

SEBI has proposed allowing the Manager of an investment product to determine and record an investor’s Accredited Investor status as part of the onboarding process.

In other words, the investor may no longer need to separately complete the accreditation journey with an Accreditation Agency before approaching the fund manager.

For the same manager or group, the proposed accreditation could remain valid for three years.

For products offered by different managers, accreditation would be undertaken when the investor is onboarded by each manager.

This is a fairly fundamental shift.

The existing framework was deliberately built around independent verification, precisely because Accredited Investor status can unlock regulatory flexibilities. SEBI itself acknowledges that allowing the Manager to determine AI status creates potential conflicts of interest and therefore proposes safeguards such as record keeping, audit, accountability and conflict-of-interest policies.

Importantly, SEBI is not proposing to eliminate the Accreditation Agency route.

The existing route would continue alongside the proposed Manager-led route, giving investors a choice between portability and convenience.

But Here Is the More Interesting Question: Who Actually Becomes an Angel Investor?

This is where the conversation gets interesting.

The existing AI framework has relatively high financial eligibility thresholds.

For an individual/HUF/family trust/sole proprietorship, the current criteria include:

• Annual income of at least ₹2 crore, OR

• Net worth of at least ₹7.5 crore, including at least ₹3.75 crore in financial assets, OR

• Annual income of at least ₹1 crore and net worth of at least ₹5 crore, including at least ₹2.5 crore in financial assets.

For many aspiring angel investors, these are substantial thresholds.

So while simplifying the accreditation process is useful, simplification does not automatically mean democratisation.

SEBI appears to recognise this issue.

The consultation paper notes that the Accredited Investor population was only 3,820 as of July 31, 2026, although this had increased sharply from 649 a year earlier.

That is still a tiny pool compared with the potential universe of investors in India.

The Potential Game Changer: Securities Market Assets

SEBI has proposed a new eligibility route based purely on securities market assets.

Under the proposal:

Individual investor: ₹5 crore or more of securities market assets

Body corporate: ₹20 crore or more of securities market assets.

The assets considered include securities such as equity, debt, REITs/InvITs, AIF units, mutual funds, certain futures positions, unlisted securities held in demat form and overseas securities market investments.

The logic is interesting.

Instead of asking an investor to repeatedly produce extensive financial documentation, securities-market holdings can potentially be verified digitally through e-CAS and broker statements.

That could make accreditation substantially more efficient.

SEBI’s Own Data Shows Why This Matters

SEBI estimates that, based on the proposed ₹5 crore securities-market-assets threshold, approximately 3.7 lakh investors could potentially become eligible for accreditation.

That compares with approximately 96,000 existing AIF investors.

That is a potentially enormous expansion of the Accredited Investor universe.

And this is where the proposal becomes much more interesting for the AIF ecosystem.

More eligible investors → more potential AIF investors → potentially more risk capital.

But there is an important caveat:

Eligible does not mean active.

Having ₹5 crore in securities does not automatically mean someone wants to become an angel investor, invest in private companies, or take venture-style risk.

The proposal may therefore solve a regulatory access problem, but it does not by itself solve the investor participation problem.

So Has SEBI “Fixed” Accredited Investor Accreditation?

Not yet.

But SEBI has clearly identified the friction points.

The consultation paper specifically records industry concerns around:

• duplication between Accreditation Agencies and fund managers;

• limited validity;

• limited number of Accreditation Agencies;

• high accreditation costs;

• reliance on financial documentation;

• digital verification of financial information; and

• expanding the universe of eligible investors.

The proposed framework directly attacks several of these issues.

The direction is clear:

Less paperwork.
More digital verification.
Manager-led onboarding.
Longer validity.
A potentially much larger AI universe.

What Could This Mean for AIF Managers?

If the proposal is eventually implemented broadly along these lines, Accredited Investor onboarding could become much closer to a normal digital KYC/onboarding workflow.

Instead of:

Investor → Accreditation Agency → Verification → Accreditation Certificate → Fund Manager → Verification Again → Investment

the proposed Manager-led model could look more like:

Investor → Fund Manager → Eligibility Verification → AI Status → Investment

with appropriate records, controls, audit and accountability.

That is a significant operational change.

And it creates an interesting opportunity for the industry:

Accreditation could increasingly become an embedded part of the investment onboarding infrastructure rather than a separate administrative process.

But There Is Still a Big Question

The central question is not whether the process becomes easier.

It is:

How far should India lower the friction around access to sophisticated investment products without lowering the standard for investor sophistication?

SEBI’s own consultation paper highlights this tension.

The AI framework exists because Accredited Investors receive access to products and regulatory flexibilities that may involve greater complexity, lower liquidity or reduced regulatory oversight.

So the challenge is to make accreditation easy enough to use, but credible enough to mean something.

That balance will determine whether the new framework actually works.

Our View

SEBI’s proposal is directionally positive.

The Manager-led accreditation model could remove a major operational bottleneck.

The ₹5 crore securities-market-assets route could dramatically expand the eligible investor universe.

And digital verification could make the entire process faster, cheaper and more scalable.

But if the objective is to genuinely deepen India’s angel and private-market ecosystem, accreditation reform is only one piece of the puzzle.

The next question is much bigger:

Can India create a framework where a much larger pool of financially sophisticated investors can participate in AIFs, angel investing and private markets — without compromising investor protection?

That is the real test of this consultation.

One Important Caveat

This is currently a SEBI consultation paper, not the final regulatory framework.

SEBI has invited public comments on Proposals 1–10 until September 3, 2026. The final regulations may therefore differ from the proposals discussed above.

On 3 August 2026, the International Financial Services Centres Authority (IFSCA) issued a circular introducing important amendments to the IFSCA (Anti Money Laundering, Counter-Terrorist Financing and Know Your Customer) Guidelines, 2022. These changes are applicable to all regulated entities operating in IFSCs, including Fund Management Entities (FMEs), banking units, intermediaries, and other regulated financial institutions.

The amendments primarily strengthen FIU reporting requirements and clarify the conditions for digital onboarding of Non-Resident Indian (NRI) customers.

Key Changes

1. Rule 8 Added Alongside Rule 7

The Guidelines have been amended to reference Rule 8 in addition to Rule 7 under the Prevention of Money Laundering (Maintenance of Records) Rules, 2005, expanding the regulatory framework applicable to reporting entities.

2. FIU Reporting Must Be Done Through FINgate 2.0

IFSCA has clarified that:

• User manuals and reporting formats are available on the FIU-India website.

• All AML reports must now be filed online through the FINgate 2.0 portal.

This reinforces the move towards standardized electronic regulatory reporting.

3. Cross Border Wire Transfer Reports (CBWTR) Added

One of the most significant changes is the inclusion of Cross Border Wire Transfer Reports (CBWTRs) alongside existing reporting obligations.

The amendments insert CBWTR requirements into the guidance relating to regulatory reporting, meaning regulated entities should review whether their AML systems are capable of generating and submitting these reports where applicable.

4. Updated Countries Allowed for NRI Digital Onboarding

IFSCA has updated the jurisdictions from which NRI customers may complete Video KYC (V-CIP), subject to other regulatory conditions.

The approved jurisdictions are:

• United States

• Japan

• South Korea

• United Kingdom (excluding British Overseas Territories)

• Canada

• UAE

• Singapore

• Australia

• European Union

Additionally, these jurisdictions must not be identified by FATF as High-Risk Jurisdictions or Jurisdictions under Increased Monitoring, nor designated by the Government of India as high-risk for money laundering, terrorist financing, or proliferation financing.

The same list has also been incorporated into the V-CIP onboarding conditions for low-risk NRI customers.

Impact on IFSC Fund Managers

Fund Management Entities and other IFSC regulated entities should consider the following actions:

• Review AML reporting workflows to ensure compatibility with FINgate 2.0.

• Evaluate whether CBWTR reporting needs to be incorporated into internal compliance processes.

• Update digital onboarding policies for NRI investors.

• Verify that V-CIP controls reflect the revised list of permitted jurisdictions.

• Ensure AML and KYC technology platforms are updated to comply with the amended Guidelines.

What’s changed?

• New deadline: 31 October 2026

• Circular: https://www.sebi.gov.in/legal/circulars/jul-2026/extension-of-timelines-with-repect-to-compliance-of-digital-accessibility-circulars-_103277.html

• The extension applies only to:

  • Conducting the accessibility audit, and

  • Remediating findings from the audit.

• All other requirements under SEBI’s Digital Accessibility Circulars continue to remain applicable without any change.

Who does this impact?

All SEBI-regulated entities, including:

• Alternative Investment Funds (AIFs)

• Portfolio Managers

• Investment Advisers

• Mutual Funds

• Stock Brokers

• Depositories

• Other SEBI intermediaries

What should AIFs do now?

Rather than treating this as a postponement, use the additional time to:

• Conduct a comprehensive accessibility audit.

• Fix WCAG compliance issues across investor-facing portals.

• Validate documents, forms, and workflows for accessibility.

• Prepare evidence for regulatory review.

Accessibility compliance is becoming a core governance expectation—not just a technology exercise.

The Securities and Exchange Board of India (SEBI) has introduced the Green-Channel: AIF Rollout Upon Document Acknowledgement (GARUDA) mechanism, marking one of the most significant operational reforms for Alternative Investment Funds (AIFs) in recent years.

The objective is simple: reduce the time taken to launch AIF schemes while maintaining accountability through Merchant Banker due diligence and manager certifications. The mechanism follows SEBI’s consultation process initiated in May 2026 and is now effective through the July 30, 2026 circular.

What is GARUDA?

GARUDA replaces the traditional review-heavy process with a Green Channel model where eligible AIF schemes can proceed with launch after filing the Placement Memorandum (PPM), subject to specified conditions.

Rather than SEBI reviewing every PPM before launch, greater responsibility is placed on:

• SEBI-registered Merchant Bankers

• AIF Managers

• Compliance Officers

The move is expected to significantly reduce fund launch timelines and enable faster capital deployment.

Timeline for Regular AIF Schemes

For Regular AIF Schemes (i.e., schemes other than AI-only Funds, Large Value Funds and Angel Funds):

New launch timeline

A scheme may be launched:

• 10 working days after filing the PPM with SEBI, unless SEBI advises otherwise.

For the first scheme of a newly registered AIF:

• Launch can occur only after:

  • SEBI registration has been granted, or

  • 10 working days from filing,

whichever is later.

This replaces the earlier, longer review process and provides much greater certainty around launch timelines.

Merchant Banker Plays a Central Role

The GARUDA framework significantly enhances the responsibility of the Merchant Banker.

The Merchant Banker must:

• Independently conduct due diligence of the PPM

• Verify the accuracy and adequacy of disclosures

• Submit a Due Diligence Certificate

• Be independent and not associated with the AIF, Sponsor, Manager or Trustee

The Merchant Banker’s details must also be disclosed in the Placement Memorandum.

Documents Required While Filing the PPM

Regular schemes must submit the following along with the PPM:

• Merchant Banker Due Diligence Certificate

• Fit & Proper declarations

• Sponsor/Manager minimum continuing interest declaration

• PAN details of:

  • AIF

  • Scheme (if available)

  • Sponsor

  • Manager

  • Trustee

  • Directors/Partners

  • Key investment team members

Immediate Launch for AI-only Funds, LVFs and Angel Funds

SEBI has introduced even greater relaxations for:

• Accredited Investor Only Funds (AI-only Funds)

• Large Value Funds (LVFs)

• Angel Funds

AI-only Funds and LVFs

These funds:

• Do not require Merchant Banker filing

• Can launch immediately upon filing the PPM with SEBI

• May launch their first scheme immediately after SEBI registration

Angel Funds

Angel Funds also receive similar treatment.

They:

• Are exempt from Merchant Banker filing

• May circulate the PPM immediately after obtaining SEBI registration

CEO and Compliance Officer Undertaking

Instead of a Merchant Banker certificate, AI-only Funds, LVFs and Angel Funds must submit a jointly signed undertaking from:

• Chief Executive Officer (or equivalent)

• Compliance Officer

confirming the accuracy and completeness of disclosures made in the Placement Memorandum.

SEBI Has Not Approved Your PPM

One important clarification under GARUDA is that:

Submission of the PPM should not be interpreted as SEBI approval.

The circular expressly states that SEBI:

• Does not certify the correctness of disclosures

• Does not guarantee the Manager’s capability

• Places responsibility on the Manager and Merchant Banker for disclosure quality

Any incorrect, misleading or incomplete disclosures may result in regulatory action.

New Naming Requirements

SEBI has also prescribed naming conventions.

New schemes must include:

• “AI only Fund” or “AIOF” for Accredited Investor Only Funds

• “LVF” for Large Value Funds

What Does “Launch” Mean?

SEBI has clarified that the launch of an AIF scheme means:

Circulation of the Placement Memorandum (PPM) to investors for soliciting commitments.

Changes to Future PPM Amendments

For AI-only Funds, LVFs and Angel Funds:

• Merchant Banker involvement is no longer required when filing future changes to the PPM.

• Amendments can be filed directly with SEBI along with the CEO and Compliance Officer undertaking.

Impact on AIF Managers

The GARUDA mechanism is expected to:

• Reduce scheme launch timelines

• Improve certainty around fundraising schedules

• Shift accountability toward Managers and Merchant Bankers

• Lower procedural delays for sophisticated investor funds

• Improve ease of doing business for India’s AIF industry

The reforms also align with SEBI’s broader objective of enabling faster deployment of capital while retaining post-facto regulatory oversight.

Source

https://www.sebi.gov.in/legal/circulars/jun-2026/guidelines-for-winding-up-of-aifs-with-respect-to-retention-of-proceeds-and-inoperative-fund-status_102171.html

Overview

SEBI has issued a significant circular providing long-awaited operational clarity on the winding-up process for Alternative Investment Funds (AIFs). The circular introduces a formal mechanism allowing AIFs to retain liquidation proceeds beyond the permissible fund life under specified circumstances and creates a new regulatory status called “Inoperative Fund.”

The objective is to enable fund managers to complete fund winding-up efficiently without remaining subject to the full regulatory framework solely because of pending litigation, tax matters, or residual operational expenses.

Key Highlights

1. Retention of Liquidation Proceeds Beyond Permissible Fund Life

SEBI now permits AIFs to retain liquidation proceeds after the end of the liquidation or dissolution period if at least one of the following conditions is met:

• Pending litigation, tax, regulatory or legal proceedings supported by official notices or communications.

• Anticipated litigation or tax liabilities with approval from at least 75% of investors by value.

• Genuine residual winding-up expenses supported by invoices or comparable historical records.

Where retention is sought due to anticipated liabilities, managers must disclose both:

• Amount proposed to be retained

• Estimated duration of retention

to investors while obtaining their consent.

2. Cap on Retention for Operational Expenses

Where monies are retained solely for residual winding-up expenses:

• Retention cannot exceed three years from the end of the permissible fund life.

• Standard operating expense categories will be prescribed through implementation standards developed by the Standard Setting Forum for AIFs (SFA) in consultation with SEBI.

3. Introduction of ‘Inoperative Fund’ Status

AIFs that have substantially completed their winding-up process but need to retain limited amounts for pending liabilities may apply to SEBI for Inoperative Fund status.

This facility is available where:

• One or more schemes retain monies under the prescribed conditions, or

• The AIF wishes to continue registration solely because of an ongoing litigation where a favourable outcome is expected.

Applications must be submitted in the prescribed format provided in Annexure A of the circular.

4. Restrictions Applicable to Inoperative Funds

Once an AIF is granted Inoperative Fund status:

• No new schemes can be launched.

• No management fees can be charged.

• Retained monies must only be invested in instruments permitted under Regulation 15(1)(f).

• Registration continues only until all liabilities are settled and retained monies are distributed.

5. Major Compliance Relief

SEBI has granted substantial compliance exemptions for Inoperative Funds.

The following requirements will no longer apply after obtaining the status:

• Limited Quarterly Activity Report

• Annual Activity Report

• Compliance Test Report (CTR)

• PPM Audit

• Intimation of changes in PPM

• Benchmarking Agency reporting

• NISM certification requirement for key investment team

• Custodian requirement

• Periodic investor disclosures

• Regular valuation requirements (subject to annual retention reporting)

These exemptions significantly reduce the compliance burden and operating costs for funds that have effectively completed their investment lifecycle.

6. Annual Retention Status Report

Instead of routine regulatory filings, Inoperative Funds and schemes retaining monies must submit an Annual Retention Status Report.

The report must include:

• Scheme details

• Reason for retaining proceeds

• Amount retained

• Amount distributed

• Balance outstanding

• Status of litigation or liabilities

• Expected resolution timeline

• Details of investments made using retained monies

The report must be filed:

• With SEBI

• With investors

• Within 30 calendar days from the end of March every financial year.

7. Applicability to Venture Capital Funds

The framework has also been extended to Venture Capital Funds registered under the erstwhile SEBI (Venture Capital Funds) Regulations, 1996.

Such VCFs can also avail:

• Retention of proceeds

• Inoperative Fund status

• Compliance exemptions under the circular.

Practical Impact

The circular addresses a long-standing operational challenge faced by AIF managers.

Previously, even after liquidating all investments, funds often had to continue maintaining full regulatory compliance because small amounts remained pending for:

• Tax assessments

• Litigation

• Regulatory proceedings

• Final operational expenses

The new framework enables managers to:

• Complete liquidation of investments

• Distribute proceeds to investors

• Retain only necessary amounts for genuine liabilities

• Obtain Inoperative Fund status

• Benefit from reduced regulatory obligations until final closure

This is expected to lower compliance costs while ensuring continued investor protection.

Key Takeaways

• Retention of liquidation proceeds beyond permissible fund life is now formally permitted under defined conditions.

• A new Inoperative Fund status enables efficient post-liquidation administration.

• Significant regulatory exemptions reduce ongoing compliance obligations.

• Annual reporting on retained monies ensures transparency for both SEBI and investors.

• The framework applies to both AIFs and erstwhile Venture Capital Funds.

At first glance, the circular appears to be a consolidation exercise. However, a deeper review reveals something more significant.

The 2026 Master Circular reflects SEBI’s continued push toward making India’s alternative investment ecosystem more transparent, more institutional, and more aligned with global private capital markets.

For fund managers, sponsors, trustees, compliance officers, family offices, and service providers, this is not merely a regulatory update—it is a glimpse into the future direction of the Indian AIF industry.

Key Highlights from the Circular

Merchant Bankers Continue to Play a Critical Role

SEBI has reaffirmed that non-LVF schemes must file their Private Placement Memorandum (PPM) through a SEBI-registered Merchant Banker.

The Merchant Banker is expected to independently verify disclosures, provide due diligence certification, and ensure the adequacy and accuracy of information provided to investors. The Merchant Banker must also remain independent and cannot be an associate of the AIF, sponsor, manager, or trustee.

For fund managers launching new schemes, merchant banker engagement remains a critical part of the launch process.

Enhanced Certification Requirements for Investment Teams

SEBI has further strengthened professional competency requirements by mandating relevant NISM certifications for key personnel within the investment team.

At least one member of the key investment team must hold the prescribed certification applicable to the relevant AIF category. This requirement now forms part of both the registration process and scheme launch process.

The message is clear: fund management is increasingly being treated as a specialized regulated profession requiring demonstrable expertise.

Greater Recognition of Accredited Investor Structures

The circular provides additional operational clarity around:

• Accredited Investor (AI) Only Funds

• Large Value Funds (LVFs)

• Scheme conversions into AI-only structures

Specific naming conventions have also been introduced, requiring schemes to clearly identify themselves as AI-only funds or LVFs.

As India’s family office and ultra-high-net-worth investor ecosystem matures, these structures are likely to gain wider adoption.

Stronger Investor Onboarding and AML Expectations

SEBI has significantly reinforced investor eligibility, FATF screening, sanctions checks, and beneficial ownership verification requirements.

Managers are now expected to conduct more rigorous due diligence on investors, particularly foreign investors, and ensure continued compliance throughout the life of the fund.

This reflects a broader global trend where private capital funds are expected to maintain AML and onboarding standards closer to those followed by regulated financial institutions.

Expanded Disclosure Expectations

The circular reiterates the importance of comprehensive disclosures through the PPM.

Fund managers are expected to provide detailed disclosures relating to:

• Distribution waterfalls

• Fee structures

• Investor grievance mechanisms

• Investor complaint statistics

• Investor Charter

• Litigation and disciplinary history

The objective is straightforward: enable investors to make better-informed investment decisions through greater transparency.

What Every AIF Manager Should Do Next

Many managers will read the circular, forward it internally, and move on.

That would be a mistake.

The better approach is to treat the circular as a practical operational checklist.

1. Review Your PPM Before the Next Fundraise

A surprising number of AIFs continue to use disclosure frameworks that were drafted years ago and subsequently amended multiple times.

Before your next fundraising cycle, review whether your PPM adequately covers:

• Waterfall disclosures

• Investor grievance disclosures

• Disciplinary history

• Co-investment disclosures

• Investor Charter requirements

A proactive review today is significantly cheaper than a regulatory issue tomorrow.

2. Reassess Your Investor Onboarding Process

Traditional KYC collection alone is no longer sufficient.

Fund managers should evaluate whether their onboarding workflows adequately cover:

• Beneficial ownership verification

• FATF screening

• Sanctions screening

• Foreign investor eligibility checks

• Ongoing monitoring requirements

Investor onboarding is rapidly becoming one of the most important operational functions within an AIF.

3. Verify Team Certifications

Certification gaps often surface at the worst possible time—during registrations, scheme launches, or investor due diligence exercises.

Managers should maintain a certification tracker covering:

• Relevant NISM certifications

• Expiry dates

• Key personnel changes

• Training requirements

This is a simple exercise that can prevent unnecessary delays.

4. Upgrade Compliance Management

The Compliance Test Report (CTR) now assumes greater significance because it must demonstrate compliance across the provisions of the Master Circular.

Managers should move beyond annual compliance exercises and establish continuous compliance monitoring processes covering:

• Fundraising activities

• Investment restrictions

• Governance requirements

• Reporting obligations

• Investor communications

Compliance is increasingly becoming a year-round activity rather than a year-end exercise.

5. Evaluate Operational Technology

The regulatory expectations placed on AIFs today are substantially higher than they were five years ago.

Fund managers must now manage:

• Investor onboarding

• AML checks

• Capital calls

• Portfolio monitoring

• Compliance reporting

• Investor communications

• CTR preparation

• PPM management

Managing these functions through spreadsheets, email chains, and disconnected systems becomes increasingly difficult as funds scale.

Technology is no longer a convenience—it is becoming a compliance necessity.

What This Means for Investors and Family Offices

While much of the discussion around the circular focuses on fund managers, investors stand to benefit significantly.

The framework promotes:

• Greater transparency

• Better disclosure standards

• Improved governance

• Enhanced investor protection

• Stronger accountability from managers

For family offices and institutional LPs, these developments should increase confidence in India’s growing private capital ecosystem.

The Bigger Picture: Where Is SEBI Taking the Industry?

The most important insight from the 2026 Master Circular is not any individual rule.

It is the regulatory direction.

Over the last several years, SEBI has steadily increased expectations around:

• Governance

• Transparency

• Reporting

• Risk management

• Investor protection

• Professional standards

Taken together, these changes suggest that India is moving toward a more institutional alternative investment ecosystem that resembles mature global markets.

In the early years of the AIF industry, obtaining registration was often the primary challenge.

Today, the larger challenge is building a fund management business that can operate efficiently, remain compliant, withstand investor scrutiny, and scale sustainably over multiple fund vintages.

The fund managers who invest early in governance, processes, compliance infrastructure, and technology will likely be best positioned to attract institutional capital in the years ahead.

Final Thoughts

The 2026 SEBI Master Circular should not be viewed as just another compliance document.

It is a blueprint for how SEBI expects AIFs to operate in the future.

For fund managers, the question is no longer:

“How do I get my AIF registered?”

The more important question is:

“How do I build an institutional-grade fund platform that remains compliant, auditable, and LP-ready over the next decade?”

The answer to that question will increasingly define the next generation of successful fund managers in India.

Source: https://www.sebi.gov.in/reports-and-statistics/reports/may-2026/consultation-on-green-channel-aif-rollout-upon-document-acknowledgement-garuda-mechanism-for-processing-of-placement-memorandum-of-alternative-investment-funds-aifs-filed-with-sebi-_101340.html

SEBI has released a consultation paper proposing a major operational shift for Alternative Investment Funds (AIFs) through the new “GARUDA” (Green-Channel: AIF Rollout Upon Document Acknowledgement) mechanism.

The objective is simple:
➡️ reduce launch timelines,
➡️ rely more on manager accountability, and
➡️ accelerate capital deployment across the AIF ecosystem.

Key Proposed Changes

1. Faster Launch for Regular AIF Schemes

Currently, AIF schemes are typically launched 30 days after filing the Placement Memorandum (PPM) with SEBI through a Merchant Banker.

SEBI now proposes:

• Launch of new schemes after 10 working days

• First schemes can launch from:

  • date of SEBI registration, OR

  • after 10 working days from filing
    whichever is later.

2. Major Relaxation for Accredited Investor (AI) Only Schemes

For AI-only schemes, SEBI proposes:

• No mandatory Merchant Banker filing

• PPM can be filed directly by the AIF Manager

• Merchant Banker Due Diligence Certificate replaced with:

  • CEO undertaking

  • Compliance Officer undertaking

• Immediate scheme launch upon filing.

This is a significant move toward a lighter-touch regulatory framework for sophisticated investors.

3. Angel Funds Also Get Easier Launch Path

Angel Funds may also receive:

• Direct filing with SEBI

• Removal of Merchant Banker DD certificate requirement

• Immediate circulation of PPM for fundraising after registration.

Why This Matters

India’s AIF industry has scaled rapidly:

• AIF count grew from 732 (2021) to 1849 (2026)

• Commitments reached ₹15.74 lakh crore

• Net investments crossed ₹6.45 lakh crore.

SEBI is effectively acknowledging that:

• the ecosystem has matured,

• Merchant Bankers have built operational expertise,

• and Accredited Investors can evaluate risks independently.

The regulator is shifting from:

“pre-approval heavy scrutiny”
to
“post-facto risk-based supervision.”

Bigger Industry Signal

The consultation paper also hints at a broader long-term direction:

future AIF ecosystems becoming increasingly AI-only (Accredited Investor focused).

That could eventually reshape:

• fundraising structures,

• onboarding workflows,

• compliance architecture,

• and investor qualification processes across the industry.

SEBI has invited public comments on the proposals until June 1, 2026.

Source: https://www.sebi.gov.in/legal/circulars/may-2026/advisory-on-emerging-advanced-artificial-intelligence-ai-tools-for-vulnerability-detection_101270.html

Background

The rapid evolution of advanced AI tools—such as Claude Mythos—has introduced a new class of cybersecurity risks for regulated entities across India’s securities ecosystem.

These tools can:

• Identify vulnerabilities at scale and speed

• Potentially enable exploitation

• Raise concerns around:

  • Data confidentiality

  • Application integrity

  • Reliability of outputs

SEBI has issued this advisory to proactively address these emerging risks.

Why This Matters for AIFs

Given the interconnected nature of market participants, a vulnerability in one entity can cascade across the ecosystem.

For AIFs, this directly impacts:

• Fund data security

• LP information confidentiality

• Portfolio company integrations

• Third-party vendor risk

SEBI emphasizes a coordinated and continuous approach to vulnerability management and threat intelligence sharing.

Key Regulatory Development: cyber-suraksha.ai Task Force

SEBI has constituted a dedicated task force “cyber-suraksha.ai” with participation from:

• MIIs

• QRTAs

• Regulated entities

• Other ecosystem stakeholders

Mandate:

• Assess cybersecurity risks from AI models

• Develop uniform mitigation strategies

• Enable threat intelligence sharing

• Report cyber incidents in real time

• Evaluate third-party vendor security posture

Key Action Points for AIFs & Regulated Entities

1. Patch Management

• Immediate updates of OS & applications

• Use virtual patching where fixes are unavailable

2. Continuous VAPT

• Regular vulnerability assessments

• Use both traditional + AI-based tools

3. Vendor Risk Management

• Ensure third-party vendors:

  • Conduct AI risk assessments

  • Deploy safeguards (patching, monitoring, hardening)

4. Change Management Discipline

• Full documentation

• Impact analysis

• Secure deployment practices

5. API Security Controls

• Maintain API inventory

• Strong authentication & authorization

• Rate limiting & whitelisting

6. SOC Monitoring & Automation

• Continuous monitoring of alerts

• Adopt SIEM + SOAR frameworks

• Onboard to Market SOC (M-SOC) where applicable

7. Risk Assessment Enhancements

• Include AI-driven threat scenarios

• Perform scenario-based testing

8. System Hardening

• Disable unnecessary services

• Implement:

  • Least privilege

  • Zero Trust (ZTNA)

9. Asset Visibility

• Maintain updated:

  • Asset inventory

  • Software Bill of Materials (SBOM)

10. Strategic AI Readiness

• Build long-term plans for:

  • AI-driven detection

  • Autonomous mitigation

  • AI-augmented SOC

Circular: https://www.sebi.gov.in/legal/circulars/apr-2026/fast-track-mechanism-for-processing-of-placement-memorandum-of-aifs-filed-with-sebi_101213.html

This marks a shift from a SEBI-led review model to a timeline-based launch framework, with greater reliance on merchant banker diligence and manager accountability.

What SEBI Has Changed

Under the earlier process, SEBI reviewed PPM disclosures and issued comments before schemes could be launched — often resulting in delays.

With this circular, SEBI has streamlined the process by allowing fund launches within a defined timeline, subject to compliance with regulatory requirements.

Key Provisions

1. Fast-Track Launch for Non-LVF Schemes

The new framework applies to:

• Angel Funds

• All AIF schemes except Large Value Funds for Accredited Investors (LVFs)

AIFs can now:

• Launch schemes

• Circulate PPMs to investors

After 30 days of filing with SEBI, unless otherwise advised.

2. Special Rule for First Scheme

For first-time AIF schemes:

• Launch allowed after SEBI registration or

• 30 days from filing

Whichever is later

3. SEBI Comments Still Binding

If SEBI provides comments within the 30-day window:

• These must be incorporated before launch

4. First Close Timeline

AIFs must achieve first close within:

• 12 months from eligibility to launch

This modifies the earlier Master Circular provisions.

5. Filing Requirements

PPMs must be filed via the SEBI intermediary portal along with:

• Merchant Banker Due Diligence Certificate

• Fit & Proper declarations

• Sponsor/Manager commitment declarations

• PAN details of all key entities and personnel

6. Responsibility Framework

SEBI has clearly shifted accountability:

• Merchant Banker + AIF Manager are responsible for

  • Accuracy of disclosures

  • Completeness of information

  • Regulatory compliance

7. Mandatory Disclaimer

PPMs must explicitly state:

• SEBI does not approve the document

• Responsibility lies with the Manager and Merchant Banker

• Disclosures are based on their due diligence

8. Applicability

• Effective immediately

• Applies to pending PPMs as well

Why This Matters

This circular reflects SEBI’s broader regulatory direction:

• Reduce processing bottlenecks

• Enable faster capital deployment

• Shift compliance responsibility to market participants

Similar to recent reporting reforms, SEBI is increasingly focusing on efficiency + accountability over pre-approval

Source: https://www.sebi.gov.in/legal/circulars/apr-2026/framework-for-net-settlement-of-funds-for-transactions-done-by-foreign-portfolio-investors-fpis-in-cash-market_101090.html

1. Background

Under the existing framework, Foreign Portfolio Investors (FPIs) are required to settle transactions on a gross basis at the custodian level. This has led to:

• Higher liquidity requirements

• Increased funding costs (including forex slippage)

• Operational inefficiencies, especially during index rebalancing

2. Key Change Introduced

SEBI has now permitted net settlement of funds for certain FPI transactions in the cash market.

What qualifies for net settlement?

• Transactions that are “outright” in nature:

  • Only buy or only sell in a security within a settlement cycle

• These transactions can now be netted to determine final fund obligation

3. Important Conditions

• ❌ Transactions involving both buy and sell in the same security (within the same settlement cycle) will continue on gross basis

• 💰 If purchases exceed sales → FPI must fund the difference

• ⚠️ Excess sale proceeds cannot be used to offset non-outright purchase obligations

• 📦 Securities settlement remains gross (no change)

• 🧾 STT and stamp duty continue on delivery basis

4. Operational Impact

This move is expected to:

• Reduce capital blocked for FPIs

• Improve liquidity efficiency

• Lower transaction and funding costs

• Simplify settlement workflows

5. Implementation Timeline

• To be implemented on or before December 31, 2026

• Standards to be defined by custodians and industry bodies

6. Illustration (as per SEBI Annexure)

As shown in the example (Pages 4–6):

• Earlier (gross): FPI had higher pay-in obligations (₹2000)

• Now (net): Pay-in reduces to ₹1000, improving capital efficiency

The diagrams on pages 5 and 6 clearly depict how fund flows between FPI → Custodian → Clearing Corporation become more efficient under the new mechanism.

7. Regulatory Basis

Issued under:

• Section 11(1) of SEBI Act, 1992

• Regulation 44 of SEBI (FPI) Regulations, 2019

Source: https://www.sebi.gov.in/legal/circulars/apr-2026/review-of-requirement-relating-to-registration-for-a-not-for-profit-organization-on-social-stock-exchange-and-minimum-subscription-requirement-for-issuance-of-zero-coupon-zero-principal-instruments_100935.html

1. Background

To promote the growth of the Social Stock Exchange (SSE) and facilitate ease of fundraising for Not-for-Profit Organizations (NPOs), SEBI has reviewed certain regulatory requirements under the SSE framework.

2. Key Changes Introduced

2.1 Extension of Registration Validity for NPOs

• NPOs can now remain registered on SSE without raising funds for up to 3 years

• Earlier limit: 2 years

• Additional 1-year extension is subject to SSE approval

2.2 Reduction in Minimum Subscription Requirement (ZCZP Instruments)

• Minimum subscription reduced from 75% → 50%

• Applicable for issuance of Zero Coupon Zero Principal (ZCZP) Instruments

• Condition:

  • SSE must conduct due diligence

  • Funds raised should still be sufficient for meaningful project implementation

2.3 Enhanced Disclosure Requirements for Under-subscription

NPOs must disclose in the fund raising document:

• Plan to raise remaining capital if minimum subscription is partially met

• Impact on project objectives if full funding is not achieved

⚠️ If minimum subscription (50% or 75%) is not achieved → Funds must be refunded

3. Regulatory Modifications

This circular introduces amendments to the SEBI Master Circular dated January 19, 2026, specifically:

• Insertion of provisions under Regulation 292F

• Updates to clauses relating to subscription thresholds and disclosures

4. Objective of the Circular

• Improve accessibility to SSE for NPOs

• Encourage broader participation

• Enable flexible fundraising while maintaining accountability

5. Effective Date

This circular is effective immediately from April 15, 2026