Green-Channel: AIF Rollout Upon Document Acknowledgement’ (GARUDA) Mechanism for AIFs

Executive Summary

The Securities and Exchange Board of India (SEBI), through its circular dated 30 July 2026, has operationalised the Green-Channel: AIF Rollout Upon Document Acknowledgement (GARUDA) mechanism. The circular introduces a significantly streamlined framework for the filing of Placement Memoranda (PPMs) and the launch of Alternative Investment Fund (AIF) schemes, with the objective of reducing regulatory timelines, improving accountability and facilitating quicker fund launches. The framework follows the amendments to the SEBI (Alternative Investment Funds) Regulations, 2012, notified on 14 July 2026.

Background

Under the earlier framework, AIFs were generally required to file the Placement Memorandum (PPM) through a SEBI-registered Merchant Banker and await regulatory processing before launching schemes. This often resulted in delays in bringing investment products to market.

The GARUDA mechanism reflects SEBI's broader agenda of promoting Ease of Doing Business while maintaining robust disclosure standards through enhanced accountability of market intermediaries rather than extensive pre-launch regulatory scrutiny.

Key Features of the GARUDA Framework

1. Faster Launch of Regular AIF Schemes

Under the revised framework, Regular AIF schemes may now be launched after 10 working days from the filing of the Placement Memorandum with SEBI, unless SEBI advises otherwise. For the first scheme of an AIF, the launch can take place from the date of registration or after completion of the 10-working-day period, whichever is later.

2. Strengthened Role of Merchant Bankers

Merchant Bankers assume a significantly enhanced responsibility under the GARUDA mechanism. They are required to:

• independently conduct due diligence on the Placement Memorandum;
• certify the veracity, adequacy and completeness of disclosures;
• confirm compliance with the AIF Regulations and applicable SEBI requirements; and
• remain independent of the AIF, its Sponsor, Manager or Trustee.

Any deficiency or lapse in disclosures may expose the Merchant Banker and the Manager to regulatory action.

3. Simplified Framework for Accredited Investor Funds and Angel Funds

The circular grants substantial procedural relaxations to:

• Accredited Investor (AI) Only Funds;
• Large Value Funds (LVFs); and
• Angel Funds.

These categories are exempt from the requirement of filing the Placement Memorandum through a Merchant Banker and incorporating SEBI's comments before launch. AI-only Funds and LVFs may launch schemes immediately upon filing the PPM with SEBI, while Angel Funds may circulate the PPM from the date of grant of registration. Instead, the CEO (or equivalent) and Compliance Officer of the Manager must furnish a prescribed undertaking confirming the accuracy and adequacy of disclosures.

4. Standardised Disclosure and Disclaimer Requirements

The circular mandates uniform disclaimer clauses in all Placement Memoranda, emphasising that:

• SEBI does not approve or certify the PPM;
• the Manager and Merchant Banker (or the Manager alone, in exempt cases) are responsible for the accuracy and completeness of disclosures; and
• investors should not construe filing of the PPM as regulatory approval.

5. Naming Convention and PPM Amendments

To enhance transparency, new schemes must clearly indicate their category by including "AI only Fund/AIOF" or "LVF" in the scheme name, as applicable. Further, AI-only Funds, LVFs and Angel Funds may directly file subsequent changes to the PPM with SEBI without routing them through a Merchant Banker, subject to the prescribed undertaking.

Regulatory Significance

The GARUDA mechanism marks a shift from a predominantly approval-based model to a disclosure-based regulatory framework, placing greater reliance on the due diligence performed by Merchant Bankers and the governance responsibilities of AIF Managers.

The reforms are expected to:

• shorten fund launch timelines;
• reduce procedural bottlenecks;
• improve operational efficiency;
• strengthen accountability of intermediaries; and
• support innovation and capital formation within India's alternative investment ecosystem.

Compliance Implications

Alternative Investment Funds, Managers and Merchant Bankers should:

• update internal procedures for filing Placement Memoranda;
• strengthen due diligence and disclosure review processes;
• ensure independence of Merchant Bankers from the AIF structure;
• revise PPM templates to incorporate the mandatory disclaimer clauses;
• update compliance manuals to reflect the GARUDA mechanism; and
• train legal, compliance and fund management teams on the revised operational framework.

Overall Assessment

The GARUDA mechanism represents one of the most significant procedural reforms for the Alternative Investment Fund industry in recent years. By substantially reducing the time required for launching new schemes while simultaneously enhancing the accountability of Merchant Bankers and AIF Managers, SEBI has sought to strike an effective balance between Ease of Doing Business and investor protection.

The framework demonstrates SEBI's transition towards a more principles-based, disclosure-driven regulatory approach, where responsibility for the quality and accuracy of disclosures rests primarily with regulated intermediaries. If implemented effectively, the GARUDA mechanism is expected to improve the speed, efficiency and competitiveness of India's AIF ecosystem while maintaining high standards of governance and market integrity.