GARUDA reflects SEBI's shift to AI-enabled regulatory oversight.
MUMBAI: The Securities and Exchange Board of India has operationalised a major reform to how investment funds come to market. Under the newly issued GARUDA framework regular Alternative Investment Fund schemes can now launch just 10 working days after filing compared to a previous process that had no fixed end date at all. Accredited investor funds, large value funds and angel funds go even further securing the ability to launch immediately upon filing.
This is a significant shift for India’s fast-growing private capital ecosystem. The reform directly addresses a bottleneck that had left 183 fund applications stuck in regulatory limbo as of March this year comprising 124 first-time fund launches and 59 subsequent schemes.
Solving a Real and Costly Problem
The scale of the previous bottleneck was considerable. Under the old system a fund could not launch until SEBI reviewed its placement memorandum, issued comments and formally took the revised document on record, a final step that carried no statutory deadline at all. With India’s AIF industry growing 135% in registered entities over five years reaching 1849 funds by March 2026, this open-ended review process had simply become unsustainable for both regulators and fund managers alike.
By clearing this entire backlog in one administrative move and replacing it with a predictable fixed timeline SEBI has removed a significant source of friction that was quietly costing India’s capital markets real economic value through delayed deployment into productive assets.
A Smart Two-Track System
What makes GARUDA particularly well designed is its differentiated approach based on investor sophistication. Regular schemes open to all investors continue to require independent verification through a SEBI-registered merchant banker who must certify that all disclosures are accurate and complete. Funds catering exclusively to accredited investors meanwhile benefit from a streamlined self-certification process reflecting the fact that these investors are legally recognised as financially sophisticated enough to evaluate risk independently.
This distinction makes regulatory sense. Accredited investors in India have grown remarkably from just 649 in May last year to over 2700 within twelve months, and this expanding pool of sophisticated capital fully justifies a faster lighter-touch pathway for funds serving them exclusively.
Real Benefits for Startups and Growth Capital
The practical implications for India’s startup ecosystem are considerable. Domestic venture capital and private equity funds account for over 40% of institutional equity investment into Indian startups, meaning any delay in launching new funds directly slows capital reaching entrepreneurs. By compressing fund rollout from what could stretch for months down to a reliable 10-day window GARUDA ensures that when promising investment opportunities emerge the capital needed to back them is not held up by administrative processing delays.
Bringing India Closer to Global Standards
This reform also meaningfully closes the competitive gap between onshore Indian fund structures and popular offshore alternatives like Singapore and GIFT City in Gujarat, both of which have long offered near-immediate fund launches. Fund managers had increasingly gravitated toward these offshore jurisdictions partly due to faster processing timelines. With GARUDA now offering comparable speed for accredited investor funds and a clear predictable timeline for regular schemes India has taken a meaningful step toward retaining more fund formation activity onshore.
Strong Industry Welcome
The response from India’s venture capital and private equity community has been notably positive. The Indian Venture and Alternate Capital Association welcomed the reform as a long-sought structural improvement noting that clearing the historical backlog alongside establishing a predictable timeline strengthens India’s standing among global institutional investors evaluating where to allocate capital.
Legal experts have also offered constructive guidance to fund managers navigating the new framework encouraging thorough upfront diligence given that SEBI retains the ability to review filings even after launch. This is a sensible built-in safeguard that maintains regulatory oversight while still delivering the speed benefits managers have long sought.
A Meaningful Step Forward
Taken together GARUDA represents thoughtful regulatory modernisation that balances genuine efficiency gains with continued investor protection. By replacing an unpredictable open-ended review process with clear timelines and a sensible risk-based approach that scales oversight according to investor sophistication SEBI has delivered a reform that serves fund managers, institutional investors and ultimately the broader Indian economy that benefits when capital reaches productive use more efficiently.
About the Author
