The Securities and Exchange Board of India (SEBI) on Monday proposed a significant “green channel” mechanism, named ‘GARUDA’, for Alternative Investment Funds (AIFs) to accelerate the launch of their schemes. This initiative, detailed in a recent consultation paper, aims to drastically cut the processing time for Placement Memorandums (PPMs) from 30 days to just 10 working days, and even allow immediate launches for specific categories, thereby streamlining capital deployment within India’s rapidly expanding AIF sector. Public comments on these proposals are invited until June 1.
Alternative Investment Funds (AIFs) represent privately pooled investment vehicles that collect funds from sophisticated investors, whether Indian or foreign, for investing in accordance with a defined investment policy. These funds typically invest in assets not easily accessible through traditional public markets, such as private equity, venture capital, real estate, and distressed assets. Over the past five years, India’s AIF industry has witnessed exponential growth, transforming into a crucial conduit for capital formation and economic development. SEBI data highlights this trajectory, with the number of registered AIFs surging from 732 to 1,849 as of March 31, 2026. This expansion corresponds with a substantial increase in cumulative commitments, reaching Rs 15.74 lakh crore, and net investments totaling Rs 6.45 lakh crore by December 31, 2025. Currently, AIFs face a mandatory 30-day waiting period after filing their PPMs with SEBI before they can commence scheme launches, a timeframe the regulator now seeks to optimize to match the industry’s dynamic pace.
Introducing the GARUDA Green Channel
Under the proposed ‘GARUDA’ mechanism, regular AIF schemes will be permitted to launch within 10 working days of filing their Placement Memorandums (PPMs) with SEBI, provided the filing is routed through a merchant banker and no objections are raised by the regulator. This marks a substantial reduction from the existing 30-day waiting period, as outlined in SEBI’s consultation paper. For an AIF’s inaugural scheme, the launch would be allowed from the date of registration or after 10 working days of PPM filing, whichever occurs later.
The regulator emphasized that this expedited process is designed to “further enable faster and efficient deployment of capital by AIFs,” recognizing the increasing volume of scheme filings driven by the industry’s robust growth. This move is expected to inject greater agility into the fundraising process, allowing AIFs to capitalize on market opportunities more swiftly.
Streamlined Process for Accredited Investor-Only Schemes and Angel Funds
A significant aspect of the proposal targets Accredited Investor-only (AI-only) schemes and Angel Funds. For these categories, SEBI plans to remove the requirement of filing PPMs through a merchant banker. Instead, fund managers will be empowered to file the PPM directly with SEBI, accompanied by a mandatory undertaking from the chief executive officer and compliance officer of the AIF manager. Crucially, these schemes would be allowed to launch immediately upon filing the PPM, bypassing any review period.
SEBI’s rationale for this exemption stems from the sophisticated nature of accredited investors. These individuals meet specific income or net-worth criteria, signifying their financial acumen and capacity to independently assess complex investment products and their associated risks. The number of accredited investors has also seen remarkable growth, escalating from 649 to 2,773 as of April 30, 2026. As of December 31, 2025, these investors held AIF units with a par value of approximately Rs 1.91 lakh crore, accounting for roughly 30 percent of total AIF investments, underscoring their significant role in the market.
Maintaining Regulatory Oversight
Despite the proposed acceleration in scheme launches, SEBI reiterated its commitment to regulatory vigilance. The regulator confirmed that it would continue to conduct post-facto scrutiny of scheme documents on a sample basis, guided by risk assessment parameters. Any detected irregularities or lapses in disclosures could lead to stringent regulatory action against the concerned entities. This ensures that while efficiency is enhanced, investor protection and market integrity remain paramount.
Market analysts view SEBI’s proactive stance as a strategic step to bolster India’s position as an attractive destination for alternative capital. “Reducing time-to-market for AIFs is critical for fostering innovation and competitive growth,” noted a Mumbai-based financial consultant, preferring anonymity due to ongoing client discussions. “This move not only reduces administrative burden but also aligns India’s regulatory framework with global best practices aimed at efficient capital allocation.”
Implications and What to Watch Next
The implementation of the ‘GARUDA’ green channel is poised to have far-reaching implications for India’s financial landscape. Faster deployment of capital by AIFs means quicker access to funding for businesses, particularly startups and emerging enterprises that often rely on alternative investment sources for growth and innovation. This efficiency gain could significantly boost the entrepreneurial ecosystem and contribute to job creation.
For investors, the streamlined process could translate into more diverse investment opportunities becoming available more rapidly. The direct filing option for AI-only schemes recognizes the maturity of accredited investors, potentially encouraging greater participation from this segment. The overall impact is expected to be a more dynamic and responsive AIF market, capable of channeling funds effectively into various sectors of the economy.
As the June 1 deadline for public comments approaches, stakeholders across the financial industry will be closely watching the final contours of these proposals. The successful implementation of ‘GARUDA’ could set a precedent for further regulatory simplifications, reinforcing SEBI’s commitment to fostering a robust and efficient capital market in India. Future developments will likely focus on how AIFs leverage this new agility and the subsequent growth trajectory of investments in critical sectors.
