SEBI has issued a consultation paper on 11 May 2026 proposing the GARUDA (Green-Channel AIF Rollout Upon Document Acknowledgement) mechanism for processing placement memorandums of Alternative Investment Funds (AIFs). This is Phase 2 of SEBI’s Ease of Doing Business reform for AIFs and, if implemented, it would reduce launch timelines for certain categories of schemes while shifting oversight toward post-facto scrutiny.
⏰ Key Dates — Act Now
Paper Issued
11 May 2026
Comment Deadline
01 June 2026
Phase 1 Already Live
30 Apr 2026 Circular
💡 What is GARUDA in One Line?
GARUDA is SEBI’s proposed green-channel mechanism under which certain AIF scheme launches would move faster on the basis of document acknowledgement, with SEBI continuing post-facto scrutiny on a sample and risk-based basis.
📈 Section 1 — Why SEBI Is Proposing This: The AIF Industry Story
The AIF industry in India has grown at a pace that has far outstripped the regulatory infrastructure designed for a much smaller market. The numbers tell the story:
| Metric | March 2021 | March 2026 | Growth |
|---|---|---|---|
| Number of AIFs registered | 732 | 1,849 | +135% in 5 years |
| Cumulative commitments raised | — | ₹15.74 lakh crore | ~30% CAGR |
| Net investments made | — | ₹6.45 lakh crore | ~30% CAGR |
| Accredited Investors (AIs) | 649 (May 2025) | 2,773 (April 2026) | +327% in 11 months |
| AIF investments held by AIs | — | ₹1,91,164 crore (Dec 2025) | ~30% of total AIF investments |
With growth comes a surge in applications. SEBI received 407 registration applications in FY 2025-26, and projects 529 registrations in FY 2026-27 — a 30% increase. New scheme applications are growing even faster: from 155 in FY 2024-25 to 266 in FY 2025-26, with a projected 456 in FY 2026-27 (72% jump). As of March 31, 2026, 183 scheme applications were pending — 124 first schemes and 59 new schemes.
This backlog is the core problem GARUDA is designed to solve. The existing 30-day waiting period and mandatory Merchant Banker review creates a bottleneck that slows down capital deployment in an industry that runs on speed. SEBI's response is to shift from upfront review to post-facto, sample-based scrutiny — trusting the AIF ecosystem's own due diligence mechanisms.
🏗️ Section 2 — The Two-Phase Reform: Phase 1 Already Live
SEBI has structured this reform in two phases:
✅ Phase 1 — Already Live
Circular dated 30 April 2026
AIFs (Regular, AI-only, Angel Funds) can now launch schemes and solicit investors 30 days after filing with SEBI — without waiting for SEBI's comments. SEBI relies on Merchant Banker due diligence certificate and AIF Manager declarations. Scrutiny happens post-facto on a sample basis.
📋 Phase 2 — This Consultation Paper
GARUDA — 11 May 2026
GARUDA proposes deeper changes: 10 working days for Regular schemes, direct filing for AI-only schemes and Angel Funds, and immediate launch / circulation benefits for specified accredited-investor categories, subject to regulatory amendment after consultation.
Related Reading
CorpLawUpdates has separately analysed SEBI’s already effective Fast-Track Mechanism for AIF PPM filing introduced through the circular dated 30 April 2026.
Read the detailed Fast-Track Mechanism analysis →
📂 Section 3 — Understanding the Three AIF Buckets
GARUDA applies differently to three categories of AIF schemes. Understanding these categories is essential to understanding the proposals:
| Category | Who Can Invest | Minimum Investment | Regulatory Oversight |
|---|---|---|---|
| Large Value Fund (LVF) | Only Accredited Investors (AIs) | ₹25 crore per investor | Lightest — already exempt from 30-day wait (existing) |
| AI Only Schemes | Only Accredited Investors (AIs) | No minimum prescribed | Medium — GARUDA proposes immediate launch framework with direct filing route, no MB requirement |
| Angel Funds | Only Accredited Investors (amended) | Accreditation-based | Medium — GARUDA proposes immediate PPM circulation through direct filing framework, no MB |
| Regular Schemes | General investors (including non-AIs) | ₹1 crore minimum | Highest — GARUDA reduces wait from 30 days to 10 working days |
ℹ️ What is an Accredited Investor (AI)?
An Accredited Investor is a person who meets net worth and/or income criteria specified by SEBI and is accredited by a third-party accreditation agency. AIs are considered financially sophisticated enough to evaluate complex investment products independently and take informed decisions without the same level of regulatory protection required for ordinary investors. As of April 30, 2026, there are 2,773 Accredited Investors in India — up 327% in just 11 months.
📋 Section 4 — The Existing Framework: What is Being Changed
Under Regulation 12 of the SEBI (AIF) Regulations, 2012, the existing scheme launch process works as follows:
- AIF prepares Private Placement Memorandum (PPM) — the document given to prospective investors
- PPM is filed with SEBI through a registered Merchant Banker at least 30 days before scheme launch, along with prescribed fees
- SEBI reviews the PPM and communicates comments (if any) to the Merchant Banker
- Merchant Banker incorporates SEBI's comments into the PPM and submits revised documents
- SEBI takes the PPM on record
- Scheme is launched and PPM circulated to prospective investors
⚠️ The Problem With This Process
SEBI's upfront review of every PPM has become a bottleneck. With 529 registration applications and 456 new scheme applications projected for FY 2026-27, SEBI's review capacity is overwhelmed. As of March 31, 2026, 183 applications were pending. Each delayed approval translates directly into delayed capital deployment — affecting the returns and efficiency of the entire AIF ecosystem.
🚀 Section 5 — The GARUDA Proposals: All 4 in Detail
SEBI has put forward four specific proposals under GARUDA. Each applies to a different category of AIF and proposes a different level of regulatory relaxation:
📊 Section 6 — Before vs After: Complete Comparison
| AIF Category | Current Process | Proposed Under GARUDA | Time Saved |
|---|---|---|---|
| LVF (Large Value Fund) | Already exempt — immediate launch | No change | — |
| AI Only Schemes — New | File via MB → wait 30 days → launch | File directly → submit undertaking → launch immediately | 30 days saved |
| AI Only Schemes — First | File via MB → wait 30 days or registration, whichever later | From date of registration — immediate | Up to 30 days saved |
| Angel Funds | File via MB → wait 30 days → circulate PPM | File directly → circulate PPM immediately from registration | 30 days saved |
| Regular Schemes — New | File via MB → wait 30 days → launch | File via MB → wait 10 working days → launch | ~16-18 days saved |
| Regular Schemes — First | Registration date OR 30 days, whichever later | Registration date OR 10 working days, whichever later | ~16-18 days saved |
⚠️ Section 7 — Post-Facto Scrutiny: The Accountability Mechanism
Important compliance point
GARUDA does not remove SEBI oversight. The consultation paper states that scrutiny of scheme documents would continue on a post-facto, sample-based, risk-assessed basis, and irregularities or lapses in the PPM may still attract regulatory action.
GARUDA does not eliminate SEBI's oversight — it shifts it from upfront review to post-facto scrutiny. This is a critically important distinction for compliance professionals:
🔍 SEBI Post-Facto Scrutiny — Key Points
- SEBI will continue to scrutinise scheme documents after launch — on a sample basis
- Selection for scrutiny will be based on risk assessment and specific criteria
- If any irregularity or lapse in the PPM is discovered — the concerned entities (AIF Manager, Merchant Banker where applicable, CEO, Compliance Officer) will be liable for regulatory action
- Comments provided by SEBI at any stage (including post-launch) must be complied with by the Merchant Banker or Manager of AIF
- SEBI can still provide comments during the 10-working-day period for Regular schemes — and these must be incorporated before launch
📌 What This Means for Compliance Officers
The CEO and Compliance Officer who sign the Undertaking for AI-only schemes and Angel Funds are personally responsible for the accuracy and completeness of the PPM. This is no longer a Merchant Banker's certificate — it is the Manager's own certification. The accountability shifts squarely onto the AIF Manager's team. A deficient PPM discovered post-facto can expose the signatories to SEBI enforcement action.
🌏 Section 8 — Why SEBI Is Confident: Global Comparisons
SEBI's shift to post-facto scrutiny is not unprecedented. SEBI examined practices in comparable jurisdictions before proposing GARUDA:
| Jurisdiction / Body | Approach |
|---|---|
| IFSCA (India — GIFT City) | Initially reviewed PPM disclosures upfront → later stopped and shifted reliance to due diligence certificate from the applicant while processing AIF scheme applications |
| Securities Commission Malaysia | Scrutiny of scheme documents done post-facto on sample basis, selected based on risk assessment |
| IVCA (Indian Venture & Alternate Capital Association) | Supported SEBI's proposal — recommended India adopt similar approach as comparable jurisdictions |
| AIPAC (Alternative Investment Policy Advisory Committee) | In its meeting of April 28, 2026, deliberated and recommended all proposals under GARUDA |
📋 Section 9 — Proposed Regulatory Amendments (Annexure A Summary)
SEBI has provided the specific regulatory text changes in Annexure A of the consultation paper. Here are the key amendments proposed:
Amendment 1 — Regulation 12 of SEBI (AIF) Regulations, 2012
| Current Text | Proposed Text |
|---|---|
| PPM shall be filed through a merchant banker at least thirty days prior to launch of scheme | PPM shall be filed through a merchant banker at least ten working days prior to launch of scheme |
| SEBI communicates comments to MB; MB ensures comments incorporated prior to launch | Comments provided by SEBI at any stage shall be complied with by MB or Manager of AIF (broader, more flexible obligation) |
Amendment 2 — Regulation 19D for Angel Funds
The existing requirement of filing PPM through a Merchant Banker for Angel Funds (Regulation 19D(4)) and SEBI's upfront comments mechanism (Regulation 19D(5)) are proposed to be deleted. The entire Angel Fund filing and launch process shifts to the self-certification model.
Amendment 3 — April 30, 2026 Circular
The circular's reference to "non-LVF schemes" is narrowed to "non-LVF and non-AI only schemes" — carving out AI only schemes from the 10-working-day timeline (since they get immediate launch under Proposal 3).
Amendment 4 — Undertaking Replaces MB Certificate
A new provision is proposed requiring that for AI only schemes and Angel Funds, a duly signed and stamped Undertaking by the CEO of the Manager (or equivalent) and Compliance Officer of the Manager of AIF shall be submitted in the specified format — replacing the Merchant Banker Due Diligence Certificate entirely.
💼 Section 10 — Practical Impact: Who Is Affected and How
| Stakeholder | Impact | Action Required |
|---|---|---|
| AIF Managers (AI-only & Angel) | Significant reduction in processing time and filing dependency under the proposed direct filing framework | Build internal PPM quality controls; CEO and CO must be prepared to sign undertakings |
| AIF Managers (Regular schemes) | Moderate benefit — 10 working days vs 30 calendar days | Retain Merchant Banker; ensure PPM is SEBI-compliant before filing |
| Merchant Bankers (SEBI registered) | Reduced mandatory role — GARUDA proposes direct filing for AI-only schemes and Angel Funds | Adapt business model; Regular scheme work continues but pipeline shrinks |
| CEOs & Compliance Officers of AIF Managers | Higher personal accountability — sign undertaking replacing MB certificate | Review and strengthen internal PPM review processes; understand liability for deficient PPMs |
| Accredited Investors | Faster access to investment opportunities; PPM quality depends on Manager's diligence | Conduct independent due diligence — no SEBI upfront review or MB certificate as safeguard |
| SEBI (Regulator) | Reduced upfront workload — shifts to risk-based post-facto scrutiny | Build robust post-facto scrutiny framework; define specific criteria for sample selection |
❓ Section 11 — Frequently Asked Questions
📝 Bottom Line — What GARUDA Means for the AIF Industry
✅ Phase 1 is already live (30 April 2026): AIFs can already launch Regular, AI-only and Angel Fund schemes 30 days after filing — without waiting for SEBI's comments.
✅ GARUDA (Phase 2) proposes further acceleration: Regular schemes — 10 working days. AI-only schemes and Angel Funds — direct filing and faster launch / circulation framework for accredited-investor categories.
✅ Accountability shifts to Managers: CEO and Compliance Officer undertaking replaces Merchant Banker certificate for AI-only and Angel Funds — ensuring they own the quality of the PPM.
✅ Post-facto scrutiny continues: SEBI's oversight shifts to risk-based sample scrutiny — non-compliant PPMs will face enforcement action even after launch.
✅ Submit comments by 1 June 2026: The AIF industry, Merchant Bankers, IVCA members and legal professionals should review and submit comments to SEBI's public consultation portal before the deadline.
Source: SEBI Consultation Paper — "Green-Channel: AIF Rollout Upon Document Acknowledgement (GARUDA) Mechanism for Processing of Placement Memorandum of Alternative Investment Funds (AIFs) filed with SEBI" dated 11 May 2026 | SEBI Circular dated 30 April 2026 (Phase 1 Fast-Track Mechanism) | SEBI (Alternative Investment Funds) Regulations, 2012 — Regulation 12 and Regulation 19D | Public comments invited at sebi.gov.in by 1 June 2026. Contact: [email protected].
This article is for informational purposes only and does not constitute legal advice. AIF managers and compliance officers should refer to the original consultation paper and consult qualified advisors for implementation guidance.
