New Green Channel Mechanism To Reduce Compliance Burden For Alternative Investment Funds
The Securities and Exchange Board of India (SEBI) has approved the GARUDA framework, a significant regulatory reform aimed at accelerating the launch of Alternative Investment Fund (AIF) schemes while reducing compliance requirements for select categories of funds. The move is expected to improve ease of doing business in India’s rapidly growing alternative investment ecosystem and benefit venture capital, private equity, and angel investment funds.
GARUDA, which stands for Green Channel: AIF Rollout Upon Document Acknowledgement, introduces a streamlined approval process that allows eligible AIF schemes to launch faster while placing greater responsibility on fund managers for regulatory compliance.
What Is The GARUDA Framework?
Under the new framework, SEBI has classified AIF schemes into four categories: Large Value Funds (LVFs), Accredited Investor (AI)-Only Schemes, Angel Funds, and Regular Schemes.
Large Value Funds will continue to be available exclusively to accredited investors, with a minimum investment commitment of Rs 25 crore per investor. AI-only schemes and Angel Funds will also remain restricted to accredited investors, although AI-only schemes will not have a prescribed minimum investment threshold.
The classification is designed to differentiate between sophisticated investors and retail-focused investment structures, allowing regulators to adopt a more flexible compliance framework for experienced investors.
Faster Launches For AI-Only Schemes And Angel Funds
One of the biggest changes introduced through GARUDA is the removal of the requirement for AI-only schemes and Angel Funds to file their Placement Memorandums (PPMs) through SEBI-registered merchant bankers.
Instead, fund managers and designated officials will be allowed to self-certify compliance with AIF regulations and other applicable laws.
This change significantly reduces the approval timeline. Under the earlier framework, fund launches typically took around 30 days and required merchant banker certification. With GARUDA, eligible schemes can now be launched immediately after receiving document acknowledgement from SEBI.
For Regular Schemes, merchant banker certification will continue to remain mandatory. However, SEBI has reduced the approval timeline for these schemes to 10 working days, making the process more efficient than before.
Increased Accountability For Fund Managers
While the framework simplifies approvals, it also places greater accountability on fund managers and designated officials.
For AI-only schemes and Angel Funds, responsibility for the accuracy and completeness of disclosures will rest entirely with fund managers and authorized officials. In the case of Regular Schemes, merchant bankers and AIF managers will continue to share responsibility for ensuring compliance and disclosure standards.
SEBI believes this approach will maintain investor protection while reducing unnecessary regulatory delays for funds that cater to sophisticated investors.
Boost For Venture Capital And Private Equity Ecosystem
The GARUDA framework is expected to provide a major boost to India’s venture capital, private equity, and startup investment ecosystem.
By reducing paperwork, lowering compliance costs, and shortening approval timelines, the framework enables fund managers to launch investment vehicles more quickly and respond faster to market opportunities.
Industry participants believe the move will encourage greater capital formation, improve fundraising efficiency, and strengthen India’s position as a preferred destination for alternative investments.
What Happens Next?
Although SEBI has approved the GARUDA framework, the amended AIF Regulations are yet to be formally notified through a Gazette notification. Some provisions may become operational only after the notification is issued.
Once implemented, GARUDA is expected to modernize India’s AIF regulatory landscape by balancing faster approvals, lower compliance burdens, and stronger accountability mechanisms for fund managers.
