Corporate Law Finance

SEBI GARUDA Circular of July 30, 2026: How AIF Schemes Now Launch in 10 Working Days

CA Adityavikram Banka

Quick Summary: What the GARUDA Circular Actually Does

  • On 30 July 2026 SEBI issued the operational circular for GARUDA, the Green-Channel: AIF Rollout Upon Document Acknowledgement mechanism, covering how a Placement Memorandum filed with SEBI is now processed.
  • A regular AIF scheme can launch 10 working days after the Placement Memorandum is filed with SEBI, unless SEBI advises otherwise. For a fund’s first scheme, the clock is the later of SEBI registration or the ten working days.
  • Accredited-investor-only funds, Large Value Funds and Angel Funds can launch immediately on filing. They do not need a merchant banker at all.
  • The price of the speed is a merchant banker due diligence certificate for regular schemes. The merchant banker must be independent of the AIF, its sponsor, manager and trustee, and must certify that the disclosures are true, fair and adequate.
  • Filing is not approval. SEBI acknowledges the document; it does not certify the disclosures. Liability for what is in the Placement Memorandum sits with the manager and, for regular schemes, with the merchant banker.

We covered GARUDA in June when the SEBI Board approved it in principle. That was a decision to build the mechanism. This is the instruction manual for using it, and it is the document that fund managers, merchant bankers and their advisers actually have to work from.

What Changed on 30 July 2026

SEBI’s circular, numbered HO/19/19/11(2)2026-AFD-RAC2/I/17617/2026 and dated 30 July 2026, is titled “Green-Channel: AIF Rollout Upon Document Acknowledgement (GARUDA) Mechanism for Processing of Placement Memorandum of Alternative Investment Funds (AIFs) filed with SEBI”. It operationalises the amendments to the SEBI (Alternative Investment Funds) Regulations, 2012 that were notified earlier in July 2026, and it applies to Placement Memoranda filed with SEBI on or after that notification.

The problem GARUDA is designed to solve is familiar to anybody who has taken a fund to market in India. A new scheme’s Placement Memorandum went to SEBI, SEBI reviewed it, SEBI issued observations, the manager responded, and the launch waited on that loop. The loop was open-ended. A manager could not tell an anchor investor when the first close would happen, because the manager did not control the timeline. In a market where fund formation competes against Singapore, Mauritius and the IFSC at GIFT City, an indeterminate wait is a competitive problem, not just an administrative one.

GARUDA replaces the open-ended review with a fixed, self-executing clock. The document is filed, SEBI acknowledges it, and unless SEBI comes back within the window, the scheme goes live. The regulatory work does not disappear. It moves forward in time, into a certification the merchant banker signs before filing rather than a review SEBI conducts after.

The Two Tracks: Who Waits Ten Days and Who Does Not

Category of scheme When it can launch Merchant banker due diligence certificate
Regular scheme (Category I, II or III AIF open to non-accredited investors) 10 working days after the Placement Memorandum is filed with SEBI, unless SEBI advises otherwise Required. Merchant banker must be independent of the AIF, sponsor, manager and trustee
First scheme of a new AIF Later of the date of SEBI registration or 10 working days from filing Required, on the same terms
Accredited-investor-only fund (name must carry “AI only fund” or “AIOF”) Immediately on filing the Placement Memorandum with SEBI Not required. Jointly signed undertaking from the CEO or equivalent and the Compliance Officer instead
Large Value Fund (name must carry the “LVF” identifier) Immediately on filing Not required. CEO and Compliance Officer undertaking instead
Angel Fund Immediately on filing, and for a first scheme from the date of registration Not required. CEO and Compliance Officer undertaking instead

The logic of the split is investor sophistication. Accredited investors, Large Value Fund investors and angel investors are presumed capable of doing their own diligence on a Placement Memorandum, so SEBI is willing to let those schemes go live on filing. A regular scheme that can be marketed to a wider pool keeps a gatekeeper, but the gatekeeper is now a private-sector intermediary with money and reputation at risk rather than a queue at the regulator.

The Naming Requirement Is Not Cosmetic

Funds relying on the fast track must carry the relevant identifier in the scheme name: “AI only fund” or “AIOF” for accredited-investor-only funds, and the “LVF” identifier for Large Value Funds. This is how the exemption is made visible to every investor, distributor and administrator who sees the name, and it is the kind of requirement that is easy to overlook in a term sheet drafted before the circular landed. Check the naming convention on any scheme currently in documentation.

The Merchant Banker Becomes the Gatekeeper

For regular schemes, the operative change is that an independent merchant banker must exercise due diligence on all disclosures in the Placement Memorandum and certify that they are true, fair and adequate. Three points follow, and they are the ones that will shape how this framework actually behaves in practice.

1. Independence is a hard test, not a comfort statement

The merchant banker cannot be an associate of the AIF, its sponsor, its manager or its trustee. For fund houses that sit inside a larger financial services group with a captive merchant banking arm, this rules out the obvious internal choice. Identify an eligible external merchant banker before you are on the critical path to a first close, not after.

2. Filing now runs through the intermediary channel

For regular schemes the merchant banker files through the SEBI Intermediary Portal, along with the scheme fee, the due diligence certificate and the prescribed fit-and-proper declarations. The manager no longer controls the filing mechanics directly. That is a change to the internal project plan as much as to the legal position, and it needs the merchant banker engaged early enough to run its own process.

3. The liability has moved, not vanished

SEBI has been explicit that acknowledgement of a filing does not amount to approval, and that SEBI does not certify the correctness of the disclosures or vouch for the manager’s capability. The manager remains responsible for the Placement Memorandum. The merchant banker adds its own certification and its own exposure for a material misstatement. Anyone reading GARUDA as a reduction in disclosure standards has read it backwards: the standard is the same, and there are now two names on it instead of one.

What This Means for Each Stakeholder

For AIF managers and sponsors

Launch timing becomes something you can put in a term sheet. A ten-working-day window is roughly two calendar weeks, which means a fund that has its documentation and its merchant banker ready can commit to a first close date with a straight face. The planning work moves earlier: merchant banker selection, diligence pack preparation and the fit-and-proper declarations all now sit before filing rather than after.

If your investor base is genuinely accredited, the case for structuring as an accredited-investor-only fund just improved materially. Immediate launch on filing, no merchant banker, no ten-day wait, in exchange for a naming identifier and a narrower investor pool.

For startups and founders raising from Indian funds

This is the part founders usually miss. A large share of Indian venture and growth capital is deployed through AIF structures, and a fund that cannot tell you when its scheme will be live cannot commit to a term sheet timeline either. Compressing the scheme launch cycle to a fixed two-week window shortens the distance between a fund’s fundraise and your cheque. Angel Funds, which back the earliest rounds, get the fastest treatment of all.

For CAs, company secretaries and fund counsel

The advisory work shifts from managing a SEBI observation cycle to preparing a filing that survives independent merchant banker diligence on the first pass. That is a different skill and a different document standard. Expect merchant bankers, who are now personally certifying, to ask harder questions about track record claims, fee and expense disclosures, conflict-of-interest provisions and related-party arrangements than SEBI’s observation letters historically did.

Compliance Checklist: Before You File Under GARUDA

  1. Classify the scheme first. Regular, accredited-investor-only, Large Value Fund or Angel Fund. Everything downstream, the timeline, the merchant banker, the naming, follows from this single determination.
  2. Fix the scheme name early. If you are relying on the accredited-investor-only or Large Value Fund track, the identifier goes in the name. Changing a fund name after marketing has started is expensive and avoidable.
  3. Appoint an independent merchant banker (regular schemes). Run the association test against the AIF, sponsor, manager and trustee, and document the conclusion in the file.
  4. Build the diligence pack before you engage. Constitutional documents, manager track record substantiation, fee and expense schedule, conflicts and related-party disclosures, key-person provisions, valuation policy. The merchant banker will ask for all of it.
  5. Confirm the filing channel and fee. Regular schemes file through the SEBI Intermediary Portal with the scheme fee, due diligence certificate and fit-and-proper declarations. Confirm the current fee and the exact document set against the circular before filing.
  6. For fast-track schemes, prepare the joint undertaking. The CEO or equivalent and the Compliance Officer sign it. Make sure both are appointed and in place before the filing date.
  7. Count in working days, not calendar days. Ten working days across a month with public holidays is materially longer than two weeks. Map the actual date before you promise it to an investor.
  8. Do not describe acknowledgement as approval. Not in the Placement Memorandum, not in investor communication, not in a pitch deck. SEBI has said in terms that filing does not imply approval, and representing otherwise is its own compliance problem.

Frequently Asked Questions

Does GARUDA mean SEBI no longer reviews Placement Memoranda?

No. SEBI retains the ability to advise otherwise within the window, which is what the phrase “unless SEBI advises otherwise” preserves. What has changed is the default. Previously the scheme waited for SEBI to act; now the scheme proceeds unless SEBI acts. That is a reversal of the default, not a withdrawal of oversight.

Can an existing AIF launch a new scheme immediately under GARUDA?

An existing registered AIF launching a regular scheme gets the ten-working-day route from filing. The additional wait for SEBI registration applies only to a fund’s first scheme, because a fund that is not yet registered cannot launch a scheme in any event.

What is the merchant banker actually certifying?

That it has independently exercised due diligence on the disclosures in the Placement Memorandum and that those disclosures are true, fair and adequate. The certificate accompanies the filing. Confirm the exact prescribed wording and format against the circular text before signing, since a certificate in the wrong form is a defective filing.

When exactly does the framework apply from?

The circular is dated 30 July 2026 and gives effect to the amendment to the AIF Regulations notified earlier in July 2026, applying to Placement Memoranda filed on or after that notification. If you have a Placement Memorandum currently in a SEBI observation cycle under the previous process, confirm the transition treatment with SEBI or your merchant banker rather than assuming the new clock applies to it.

Does this change anything for Category III AIFs or for AIFs in the IFSC?

The circular addresses schemes of AIFs registered with SEBI under the AIF Regulations, which includes Category III. AIFs set up in the IFSC at GIFT City are regulated by the International Financial Services Centres Authority under a separate framework, and this circular does not govern them. If you are comparing an onshore AIF against an IFSC fund structure, note that the SEBI-side timeline has just improved.

The Bottom Line

GARUDA is a genuine deregulation, and it is worth being precise about what kind. SEBI has not lowered the disclosure standard for a Placement Memorandum. It has moved the check from a public queue with no fixed end to a private certification with a fixed date, and it has taken the check away entirely where investors are sophisticated enough to run it themselves.

For a fund manager, the practical consequence is that scheme launch stops being the unpredictable item on the fundraising timeline. For everyone advising that manager, the work moves earlier and gets harder, because the diligence that used to happen in an observation cycle now has to be right before the document is filed.

Related Reading on TaxUpdate.in

Planning a Fund Launch or a Structure Decision?

Choosing between a regular scheme, an accredited-investor-only fund and an IFSC structure is a decision with tax, FEMA and regulatory consequences that do not always point the same way. If you are working through that trade-off, or sizing up what independent merchant banker diligence will demand of your documentation, schedule a strategy session and we will map it against your specific fund plan.

Disclaimer: This article is published by Tax Update India for general information and professional awareness. It is not legal, tax or investment advice, and it does not create an adviser-client relationship. The circular number, title and date stated here are taken from the SEBI website as retrieved on 4 August 2026; the operative detail is drawn from the circular as reported in professional and financial press, because the circular text is published as an attachment that could not be extracted directly. Before acting, read the full circular on sebi.gov.in and confirm timelines, formats, fees and transition treatment against the bare text. Nothing here is a recommendation to invest in any fund or scheme.

CA Adityavikram Banka
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