SEBI GARUDA Proposal 2026 for AIF Scheme Launches

SEBI GARUDA AIF Green Channel Consultation Paper 2026 — Scheme Launch Ease of Doing Business

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.

📂 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:

PROPOSAL 1

Regular Schemes — 30 Days Reduced to 10 Working Days

What changes:

New schemes: Wait period reduced from 30 calendar days → 10 working days from date of filing application with SEBI through Merchant Banker, unless otherwise advised by SEBI
First scheme of an AIF: Can launch from the date of grant of SEBI registration OR after 10 working days of filing — whichever is later

What stays the same: Filing through a Merchant Banker is still required for Regular schemes. Merchant Banker due diligence certificate still mandatory.

📊 Proposed Regulation Change

Regulation 12(2) of SEBI (AIF) Regulations, 2012 — "thirty days" → "ten working days"

PROPOSAL 2

AI Only Schemes & Angel Funds — Direct Filing Without Mandatory Merchant Banker Route

What changes for both AI only schemes AND Angel Funds:

Direct filing: Manager of AIF may file the PPM directly with SEBI instead of filing through a Merchant Banker
Undertaking replaces MB certificate: Instead of the Merchant Banker's Due Diligence Certificate, a duly signed and stamped Undertaking by the CEO of the Manager (or equivalent) AND the Compliance Officer of the Manager of the AIF shall be submitted in the specified format

Rationale: Accredited Investors are financially sophisticated enough to evaluate complex products. Merchant Banker involvement was designed for investor protection — since all investors in these schemes are AIs, the requirement is no longer proportionate to the risk.

PROPOSAL 3

AI Only Schemes — Immediate Launch (Zero Wait Time)

What changes specifically for AI Only Schemes:

First scheme: Can launch immediately from the date of grant of SEBI registration — zero waiting period
New schemes: Can launch immediately upon filing the PPM with SEBI along with the CEO + Compliance Officer Undertaking — no waiting period at all

✅ Combined Effect of Proposals 2 + 3 for AI Only Schemes

File PPM directly → Submit CEO + CO Undertaking → Launch immediately under the proposed GARUDA mechanism, subject to SEBI's continuing post-facto scrutiny framework.

PROPOSAL 4

Angel Funds — Immediate PPM Circulation from Registration Date

What changes specifically for Angel Funds:

Angel Funds can immediately circulate their PPM to investors for soliciting funds from the date of grant of SEBI registration
No waiting period — file PPM (directly, without MB per Proposal 2) → registration granted → immediately start soliciting from Accredited Investors

Note: Angel Funds can only onboard Accredited Investors — this amendment to SEBI (AIF) Regulations, 2012 is already in effect.

📊 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

Q1Is GARUDA already in force or is it still a proposal?

GARUDA is still a consultation paper — a proposal for public comment. Phase 1 (30-day fast-track mechanism via circular dated 30 April 2026) is already in force. Phase 2 (GARUDA) will require amendment to SEBI (AIF) Regulations, 2012 — which needs SEBI Board approval after the comment period. Public comments are invited until 1 June 2026.

Q2If GARUDA is approved, do AI-only scheme managers need a Merchant Banker at all?

No — not for the PPM filing process. The Manager can file the PPM directly with SEBI and replace the Merchant Banker's Due Diligence Certificate with a CEO + Compliance Officer Undertaking. However, Merchant Bankers may still be engaged for other regulatory or transaction-related services at the AIF's discretion.

Q3What is the risk of launching under the undertaking model if there are errors in the PPM?

The CEO and Compliance Officer who sign the undertaking are personally accountable. If SEBI's post-facto scrutiny reveals irregularities or lapses in the PPM, the AIF Manager, its CEO and Compliance Officer can face SEBI enforcement action. This is a significant responsibility shift — compliance officers must ensure PPM review processes are robust before any undertaking is signed.

Q4Does the 12-month first-close deadline change under GARUDA?

No change. The first close of any scheme must still be declared not later than 12 months from the date on which the AIF becomes eligible to launch its scheme. This provision remains intact in the proposed amendments (marked "No change" in Annexure A).

Q5How do I submit comments on the GARUDA consultation paper?

Comments must be submitted by June 1, 2026 exclusively via SEBI's online web-based public comments form at: sebi.gov.in Public Comments Portal. For technical issues, email [email protected] with the subject: "Consultation paper on GARUDA Mechanism for Processing of PPM of AIFs filed with SEBI".

Q6Will SEBI stop reviewing PPMs entirely under GARUDA?

No. SEBI will continue to scrutinise scheme documents — but post-facto (after launch) on a sample basis driven by risk assessment. This is the same model used by IFSCA and Securities Commission Malaysia. SEBI can still issue comments at any stage, and these must be complied with by the Manager or Merchant Banker.

📝 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.

SEBI GARUDA Proposal 2026: Faster AIF Scheme Launches, Direct Filing & Post-Facto Scrutiny