SEBI Mulls ‘Lodge And Launch’ Model To Speed Up AIF Scheme Launches

The Securities and Exchange Board of India (SEBI) is contemplating an alternative framework for the lodging and launch of alternative investment funds (AIFs). This will speed up the approval process for launching new fund schemes.

Speaking at the IVCA Conclave, SEBI Chairman Tuhin Kanta Pandey said the regulator is evaluating a model that would allow certain AIF schemes to be launched faster by relying on due diligence certificates issued by merchant bankers.

The proposed framework is aimed at improving ease of doing business, accelerating fund launches, and helping mobilise private capital more efficiently.

How Would The ‘Lodge And Launch’ Framework Work?

Under the proposed system, SEBI could rely on merchant bankers’ due diligence certifications for certain AIF schemes instead of conducting a full approval process before launch.

In the case of AI-only schemes, fund managers would have the role of ensuring that disclosures are accurate and complete. The goal is to eliminate regulatory bottlenecks, but ensure accountability and that the standards of governance are maintained in the industry.

Why Is SEBI Considering This Change?

This shift coincides with the rapid expansion of India's AIF industry in recent years.

According to SEBI's figures:

• As of December 2025, total commitments had climbed to roughly ₹15.7 lakh crore.

• Actual investments stood at around ₹6.45 lakh crore.

• The industry has grown at around a 30% CAGR over the past five years.

Pandey observed that, despite this impressive growth, a substantial amount of committed capital is still unallocated, suggesting considerable potential for future investment opportunities.

Why Is SEBI Urging Private Capital To Take More Risk?

The regulator also emphasised that private capital must play a larger role in funding innovation and emerging sectors.

Pandey noted that about ₹205 billion of AIF capital had been invested in startups as of 31 December 2025. This implies that there is a substantial amount of capital that is quite conservative.

He cautioned that if private capital avoids higher-risk sectors, the AIF framework's core objective of supporting innovation and new businesses could be undermined.

What Concerns Has SEBI Raised?

Mis-selling, valuation and awareness of the investor in the AIF ecosystem were also concerns raised by SEBI. The nature of AIFs is normally illiquid, long-term investments, and complicated structures, and hence, transparency and disclosure are essential.

Higher return potential must always be accompanied by clear communication of risks. This is because AIFs are designed primarily for sophisticated investors.

In valuations, the SEBI chief cautioned that shaky or opaque valuations would have an undermining effect on confidence in the market, as AIFs tend to have early-stage or under-priced investments. In an effort to enhance transparency, SEBI has put in place measures that include dematerialisation of AIF units and compulsory reporting of net asset value (NAV) to depositories.

What Other Reforms Is SEBI Working On?

SEBI is also trying to streamline the accredited investor system that enables sophisticated investors to invest in some investment products more flexibly.

With growth in alternative investment products, the number of accredited investors has dramatically risen to 2,181 in February 2026, as compared to 649 in May 2025.

Pandey asserted that the AIF industry was growing rapidly and may contribute more significantly to the channelisation of the private funds to the useful sectors of the economy.

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What Does This Mean For Investors?

To investors, the increased speed in approving the schemes could result in increased investment opportunities in the private equity, venture capital and infrastructure-based funds. The focus on good disclosure, valuation discipline and investor suitability by SEBI, however, shows that regulatory control will be very strict despite the expansion of the industry.

With India's Alternative Investment Fund (AIF) market growing, these funds are poised to become increasingly important in funding startups, sectors driven by innovation, and infrastructure projects that require a long-term commitment. This shift could fundamentally alter the way private capital circulates within the economy.

Sources:

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