SEBI's Green Channel for AIF Schemes Explained: What GARUDA Means for India's Alternative Investment Market

India's Alternative Investment Fund (AIF) industry has grown fast over the past few years and SEBI has finally updated its regulatory machinery to keep pace. On July 30, 2026, the markets regulator introduced the operational framework for GARUDA, short for Green-Channel: AIF Rollout Upon Document Acknowledgement, a mechanism that cuts down the time it takes to launch an AIF scheme and shifts the compliance model from prior scrutiny to accountability-based oversight.

Why Did SEBI Introduce GARUDA?

The AIF industry in India has expanded sharply. The number of registered AIFs increased from 732 in March 2021 to 1,849 by March 2026, marking a 153% rise over five years. Cumulative commitments raised by AIFs rose to ₹16.94 lakh crore as of March 31, 2026, while net investments increased to ₹6.76 lakh crore, highlighting the sustained growth of India's alternative investment ecosystem. 

The rapid expansion of the AIF industry also led to a surge in regulatory filings. In FY26, SEBI received 407 AIF registration applications and 266 applications for new schemes, up from the previous year. As of March 31, 2026, 183 scheme application, 124 first schemes and 59 new schemes were pending. The rising volume of applications increased the regulatory processing burden, prompting SEBI to propose the GARUDA framework to streamline approvals and accelerate capital deployment.

GARUDA is SEBI's answer to that problem. The circular, which carries immediate effect, follows amendments to the SEBI (Alternative Investment Funds) Regulations, 2012 notified via gazette on July 14, 2026.

How the Old System Worked

Under the previous framework, an AIF had to file a Placement Memorandum (PPM), the key disclosure document with SEBI through a registered merchant banker and then wait 30 days before launching a scheme. SEBI would review the document during this window.

GARUDA replaces this with a document-acknowledgement model. The regulator receives the PPM, acknowledges it, and the fund can proceed subject to conditions.

The New Launch Timelines Under GARUDA

Regular Schemes

All AIF schemes other than Accredited Investor (AI) only schemes and Angel Funds can now be launched after 10 working days from filing the Private Placement Memorandum (PPM) with SEBI through a registered merchant banker, unless SEBI communicates otherwise.

First Time Schemes

For an AIF launching its first scheme, the launch can take place from the date of SEBI registration or after 10 working days from filing the application, whichever is later.

AI Only Schemes

AI only schemes are not required to file the PPM through a merchant banker. Instead, the AIF manager can file the PPM directly with SEBI along with an undertaking signed by the Chief Executive Officer (or equivalent) and the Compliance Officer. These schemes can be launched immediately upon filing the PPM, with no mandatory waiting period.

Angel Funds

Angel Funds also follow the direct filing route and are not required to route their PPM through a merchant banker. They can immediately circulate the PPM to investors for fundraising from the date of grant of SEBI registration, allowing them to begin raising capital without a mandatory waiting period.

Greater Accountability for Merchant Bankers and Fund Managers

The faster approval process is accompanied by greater accountability for intermediaries. SEBI has introduced mandatory disclaimer clauses in Private Placement Memorandums (PPMs), clarifying that filing a PPM with the regulator does not amount to regulatory approval. The responsibility for the accuracy, adequacy and completeness of disclosures rests with the AIF manager and the merchant banker.

For AI-only schemes and Angel Funds, where a merchant banker is not involved, this responsibility rests entirely with the AIF manager, supported by an undertaking from the Chief Executive Officer (or equivalent) and the Compliance Officer. For regular schemes, the merchant banker's name and registration number must also be disclosed in the PPM.

SEBI has also standardised naming conventions to improve transparency. AI-only schemes must carry the suffix "AI Only Fund" or "AIOF", while Large Value Funds must append "LVF" to their scheme names.

SEBI Retains Post-Facto Oversight

Although the approval process has been streamlined, SEBI will continue to conduct post-facto scrutiny of scheme documents on a sample and risk-based basis. Any deficiencies or non-compliance identified during this review may invite regulatory action against the AIF manager and, where applicable, the merchant banker.

By shifting greater responsibility to intermediaries while retaining post-facto oversight, SEBI seeks to improve the ease of doing business without compromising regulatory supervision. 

Conclusion

GARUDA is a significant step towards improving the ease of doing business for India's AIF industry. Reducing the scheme launch timeline from 30 days to 10 working days for regular schemes, while allowing immediate launches for AI-only schemes and Angel Funds, enables fund managers to bring investment products to market more quickly.

For investors, particularly accredited investors with the financial sophistication to evaluate complex investment products, the framework provides faster access to new fund opportunities. The revised process applies to Private Placement Memorandums (PPMs) filed after the notification of the SEBI (Alternative Investment Funds) (Second Amendment) Regulations, 2026, and the associated circulars.