India’s capital markets regulator is exploring faster approvals for alternative investment funds (AIFs) to boost sentiment and participation in the fast-growing segment.
It is evaluating a “lodge and launch” framework that could significantly shorten the time taken for new AIF schemes to come to market, said Tuhin Kanta Pandey, chairman of the Securities and Exchange Board of India (Sebi) at the IVCA Conclave on Wednesday.
Under the proposed model, may rely on due diligence certificates issued by merchant bankers for certain AIF schemes. For schemes intended exclusively for accredited investors, the responsibility for disclosure diligence would rest with the AIF manager.
“This framework can improve ease of doing business, accelerate fund launches, and support faster mobilization of private capital,” said. “As always, we will consult with the industry on this proposal.”
Industry growth
India’s AIF industry, which pools funds from sophisticated investors to invest in startups and private equity to infrastructure, has expanded rapidly in recent years. The country now has more than 1,700 registered AIFs. As of December 2025, total commitments to these funds stood at about ₹15.74 trillion, while investments had reached around ₹6.45 trillion. The industry has grown at a compound annual growth rate of nearly 30% over the past five years, according to Sebi.
The market regulator is looking to ease the process and reduce the cost of accreditation. are individuals or entities certified to have a high net worth, income, or financial sophistication, allowing them to invest in complex products such as alternative investment funds with fewer regulatory protections.
“We are exploring ways to leverage digital public infrastructure to further ease and streamline the process of accreditation,” Pandey said, adding that reducing costs will help make the process accessible to eligible investors.
The number of accredited investors rose to 2,181 as of February 20 from 649 in May 2025. Such investors account for about 30% of total AIF investments.
The Sebi chief also flagged several challenges and risks of investing in AIFs that investors should be cautious about.
One of the key concerns is mis-selling and product suitability. AIFs have complex structures, illiquid assets and long holding periods. Pandey said distributors and managers must ensure that disclosures are clear and that risk profiling becomes a genuine exercise rather than a procedural formality.
AIFs also have a relatively modest share of capital flowing into early-stage innovation. As of December 2025, about ₹205 billion of AIF investments had been directed towards startups.
“If private capital stays too conservative, a core purpose of the AIF framework is lost,” said Pandey. “The industry can do much more to back innovation-led sectors and emerging businesses.”
AIFs often invest in illiquid or early-stage companies, where valuation methodologies can significantly influence investor perception and public market outcomes.
Weak or opaque valuation processes can undermine confidence and distort price discovery when portfolio companies approach public markets, Pandey said.