Sebi introduces GARUDA, a streamlined framework to accelerate the launch of Alternative Investment Funds, easing compliance and enhancing disclosure requirements.
New Delhi, India Jul 30, 2026 ALN: In a significant move aimed at enhancing the operational efficiency of Alternative Investment Funds (AIFs), the Securities and Exchange Board of India (Sebi) has launched the GARUDA framework, which stands for 'Green-Channel: AIF Rollout Upon Document Acknowledgement.' This framework is designed to simplify and expedite the approval process for AIF schemes, allowing these investment vehicles to launch their offerings more swiftly and efficiently.
The GARUDA framework comes in the wake of recent amendments to the Sebi (Alternative Investment Funds) Regulations, 2012, which were officially notified earlier this month. These amendments are part of Sebi's ongoing efforts to create a more conducive environment for investment funds, thereby encouraging the growth of the Indian capital markets. The introduction of the GARUDA framework is seen as a proactive step to address the challenges faced by AIFs in the scheme approval process, which has historically been viewed as cumbersome and time-consuming.
Under the newly introduced GARUDA framework, AIFs that are launching regular schemes will now be able to proceed with their launches 10 working days after they have filed their Placement Memorandum (PPM) with Sebi through a registered merchant banker. This is a notable reduction in the waiting period, as previously, the approval process involved longer timelines that could delay the launch of new investment schemes.
For first-time schemes, the launch can commence either from the date of Sebi registration or after the 10-working-day period from the filing of the application, whichever occurs later. This flexibility is designed to provide AIFs with a more streamlined approach to entering the market, allowing them to respond more quickly to investor demand and market conditions.
In addition to regular schemes, Sebi has established a more streamlined process specifically for certain categories of funds, including Accredited Investor-only (AI-only) funds, Large Value Funds (LVFs), and Angel Funds. These funds enjoy the privilege of being exempt from the requirement to file their PPM through a merchant banker, allowing them to launch their schemes immediately upon filing the PPM with Sebi. This exemption is particularly significant for smaller funds and startups that may lack the resources to engage a merchant banker for the approval process.
The first schemes of AI-only funds and LVFs can be launched from the date Sebi grants registration, while Angel Funds are permitted to circulate their PPMs to potential investors from the date of registration. This expedited process is expected to encourage more investment activity in these categories, which are crucial for fostering innovation and growth in various sectors of the economy.
Despite the accelerated approval process, Sebi has mandated that merchant bankers conduct independent due diligence on all disclosures made in the PPMs of regular schemes. They are required to certify that these disclosures are true, fair, and adequate. This requirement serves as a safeguard to ensure that investors receive accurate and reliable information about the investment opportunities being presented to them.
Furthermore, merchant bankers appointed for filing PPMs must not have any affiliations with the AIF, its sponsor, manager, or trustee. This provision is intended to mitigate conflicts of interest and enhance the integrity of the disclosure process. Sebi has also introduced mandatory disclaimer clauses in PPMs, which clarify that submitting the document to Sebi does not imply regulatory approval. Instead, the responsibility for the accuracy and completeness of disclosures lies with the AIF manager and the merchant banker.
For AI-only funds, LVFs, and Angel Funds, the responsibility for disclosures will rest solely with the AIF manager, who will be supported by an undertaking from the chief executive officer and compliance officer instead of relying on a merchant banker. This shift in responsibility is indicative of Sebi's trust in the capabilities of fund managers while also placing a greater onus on them to ensure compliance with regulatory standards.
Additionally, Sebi has mandated that new Accredited Investor-only schemes must include the terms "AI only fund" or "AIOF" in their names, while Large Value Funds must carry the suffix "LVF." This naming convention is designed to enhance transparency in the market, enabling investors to easily identify the type of fund they are considering for investment.
In a further move to streamline operations, Sebi has exempted AI-only funds, LVFs, and Angel Funds from the requirement to route changes in their PPMs through merchant bankers. Such changes can now be filed directly with Sebi along with the prescribed undertaking, thereby reducing the administrative burden on these funds and allowing for quicker adjustments in response to changing market conditions or regulatory requirements.
The GARUDA framework and the associated amendments to the Sebi regulations are effective immediately and apply to all AIF scheme PPMs filed with the regulator from the date of notification of the Sebi (Alternative Investment Funds) (Second Amendment) Regulations, 2026. This immediate implementation reflects Sebi's commitment to fostering a more responsive regulatory environment that can keep pace with the evolving dynamics of the investment landscape.
The implications of the GARUDA framework are far-reaching. By expediting the approval process for AIF schemes, Sebi is likely to encourage greater participation in the capital markets from both institutional and retail investors. This could lead to an increase in the number of innovative investment products available in the market, catering to a diverse range of investor preferences and risk appetites.
Moreover, the framework is expected to enhance the attractiveness of AIFs as investment vehicles, particularly in a landscape where investors are increasingly seeking alternative avenues for wealth creation beyond traditional equity and debt instruments. As the AIF sector continues to evolve, the GARUDA framework may serve as a catalyst for further growth, innovation, and competitiveness within the Indian financial markets.
In conclusion, the launch of the GARUDA framework represents a significant milestone in Sebi's ongoing efforts to modernize the regulatory landscape for AIFs. By simplifying and expediting the scheme approval process, Sebi is not only enhancing operational efficiency but also fostering a more vibrant and dynamic investment ecosystem in India.
To learn more about the latest developments in Funding & Investments, stay updated with our exclusive reports and analyses on AiLensNews.
