Launching an AIF just got faster: What SEBI's new GARUDA framework means

The Securities and Exchange Board of India (SEBI) has introduced a faster route for launching Alternative Investment Fund (AIF) schemes, unveiling a new mechanism called GARUDA that aims to reduce regulatory timelines while placing greater responsibility on merchant bankers and fund managers for the quality of disclosures.

GARUDA, short for Green-Channel: AIF Rollout Upon Document Acknowledgement, is designed to simplify and expedite the processing of Placement Memorandums (PPMs) — the key disclosure document that AIFs file before launching a scheme. The framework follows amendments to the SEBI (Alternative Investment Funds) Regulations, 2012, notified earlier this month.

A quicker route to market

Under the new framework, regular AIF schemes can now be launched 10 working days after filing the Placement Memorandum with SEBI, unless the regulator advises otherwise. For a fund's first scheme, the launch can take place from the date of SEBI registration or after 10 working days from filing the application, whichever is later.

The change is expected to make fundraising timelines more predictable and help fund managers bring investment products to market faster, reducing procedural delays without eliminating regulatory oversight.

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What is an Alternative Investment Fund (AIF)?

An Alternative Investment Fund (AIF) is a privately pooled investment vehicle regulated by the Securities and Exchange Board of India (SEBI) that invests in assets other than traditional options such as stocks, bonds, or mutual funds. AIFs typically invest in alternative asset classes like private equity, venture capital, hedge funds, real estate, infrastructure, distressed assets, and commodities. They are primarily designed for high-net-worth individuals (HNIs), ultra-HNIs, institutional investors, and accredited investors seeking portfolio diversification and potentially higher returns.

Under SEBI regulations, the minimum investment in an AIF is generally ₹1 crore (except for accredited investors under specified norms). AIFs can be structured as trusts, companies, LLPs, or corporate bodies and are classified into Category I, Category II, and Category III based on their investment strategy and objectives.

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Merchant bankers assume greater responsibility

A key feature of the GARUDA mechanism is the enhanced role of merchant bankers.

Every Placement Memorandum for a regular AIF scheme must now be filed through an independent SEBI-registered merchant banker, who will be responsible for carrying out due diligence on all disclosures. The merchant banker must satisfy itself about the veracity and adequacy of the information contained in the PPM and certify that the disclosures enable investors to make informed investment decisions. Merchant bankers associated with the AIF, its sponsor, manager or trustee are not permitted to undertake this role.

SEBI has also mandated that the Placement Memorandum include a disclaimer confirming that the merchant banker has independently verified the disclosures and that the document complies with applicable regulations.

Faster process, not automatic approval

The market regulator clarified that filing a Placement Memorandum does not amount to SEBI approval. Responsibility for the accuracy and completeness of disclosures continues to rest with the manager and the merchant banker, who may face regulatory action if there are material omissions, inaccuracies or misleading statements.

SEBI's GARUDA Framework: What's changing

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Relief for specialised AIF categories

The circular also eases compliance requirements for Accredited Investor (AI)-only Funds, Large Value Funds (LVFs) and Angel Funds.

AI-only Funds and LVFs are exempt from routing their Placement Memorandums through merchant bankers and may launch schemes immediately after filing the PPM with SEBI. Likewise, Angel Funds can begin circulating their Placement Memorandums to investors immediately after obtaining SEBI registration. For these categories, responsibility for disclosures rests with the AIF manager, supported by prescribed undertakings.

The circular came into force with immediate effect and applies to all Placement Memorandums filed after the notification of the SEBI (Alternative Investment Funds) (Second Amendment) Regulations, 2026.

The GARUDA framework marks a shift towards a disclosure- and accountability-based regulatory approach. By shortening launch timelines while strengthening the role of merchant bankers and fund managers, SEBI aims to improve the ease of doing business for India's growing AIF industry without compromising investor protection.

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