Mumbai, March 11 The capital markets regulator, Sebi, is exploring a new regulatory framework for Alternative Investment Funds (AIFs) that could speed up the launch of fund schemes, its Chairman Tuhin Kanta Pandey said on Wednesday.
The proposed "Lodge and Launch" model would allow certain AIF schemes to be launched faster by relying on due diligence certificates issued by merchant bankers, which reduces the time needed for regulatory approvals.
Speaking at the IVCA Conclave 2026, Pandey said the framework aims to improve the ease of doing business, accelerate fund launches, and facilitate faster mobilization of private capital.
Under the proposed system, specific AIF schemes may rely on merchant bankers for due diligence certification, while for AIFs with only accredited investors, the AIF manager will be responsible for ensuring disclosure-related due diligence, he added.
The regulator said it will consult with the industry on the proposal.
The AIF industry in India has expanded rapidly in recent years. The country now has more than 1,700 registered AIFs, with total commitments reaching around Rs 15.74 lakh crore and investments at about Rs 6.45 lakh crore as of December 2025, reflecting a Compound Annual Growth Rate (CAGR) of nearly 30 per cent over the past five years.
At the same time, the Sebi chief flagged "mis-selling" and "product suitability" as key challenges for the industry. He emphasised that AIFs are designed for sophisticated investors, given that they typically involve illiquid assets, long investment horizons, complex structures, and differentiated risk-return profiles. As a result, the promise of higher returns must be accompanied by clear disclosure of the associated risks, he said.
Another concern highlighted by Pandey was whether sufficient capital is being channeled into innovation and emerging sectors.
Although AIFs were expected to fund uncertainty, innovation, and early-stage ventures, data shows that only about Rs 205 billion of AIF capital had been invested in start-ups as of December 31, 2025, indicating scope for greater allocation towards these areas, he added.
Pandey also stressed discipline in valuation is critical for AIFs, particularly as they invest in early-stage and illiquid assets where credibility begins with fair and transparent pricing.
Citing governance measures, he said the move to dematerialise AIF units and investments, along with reporting net asset value (NAV) to depositories, is not merely procedural.
"It improves transparency, strengthens monitoring, and reduces operational risks," he said, adding that such steps help build trust in a market that is becoming more sophisticated.
Also, he said, the regulator has provided flexibility through a light-touch framework for accredited investor-only schemes where all participants are sophisticated.
The Sebi chief also pointed to the recently simplified reporting requirements through a comprehensive annual activity report and rationalised quarterly filings, which are expected to reduce compliance burden without compromising oversight.
Pandey noted that the current geo-political situation is a reminder that "capital must do more than chase returns, it must also build resilience." In this context, AIFs can play a critical role by financing sectors that strengthen India's long-term capabilities, including renewable energy, energy storage, logistics, strategic manufacturing, and supply-chain infrastructure.
"While AIFs are supporting growth today, they are also creating room for the next wave of entrepreneurship, infrastructure development, and enterprise expansion. They are carrying capital where traditional finance may not reach and linking private capital more closely to productive enterprise," he said.