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 (AI only funds) and Large Value Funds can launch immediately on filing the Placement Memorandum with SEBI, and a first scheme from the date of SEBI registration. Angel Funds can circulate the Placement Memorandum to investors from the date of SEBI registration. None of the three files through a merchant banker.
  • 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 specifies the operational modalities following the amendments to the SEBI (Alternative Investment Funds) Regulations, 2012 notified on 14 July 2026, and it applies to Placement Memoranda of all schemes and funds filed with SEBI from the date of notification of the SEBI (Alternative Investment Funds) (Second Amendment) Regulations, 2026.

The circular states its objective as easing and expediting the launch of schemes and funds by AIFs. SEBI’s Board memorandum on GARUDA sets out the background. Filing of a Placement Memorandum through a SEBI registered merchant banker has been required since SEBI’s circular of 21 October 2021. Until recently, SEBI reviewed the disclosures and the merchant banker’s due diligence certificate and gave comments, and the scheme launched only after the revised document was taken on record. SEBI’s circular of 30 April 2026 then introduced a fast track under which Regular schemes, AI only schemes and Angel Funds could launch 30 days after filing unless SEBI advised otherwise.

GARUDA shortens that clock for Regular schemes to 10 working days from filing, unless SEBI advises otherwise, and lets AI only funds and Large Value Funds launch immediately on filing. Reliance on the merchant banker’s due diligence certificate, and on the manager’s own undertaking for the exempt categories, continues in place of a SEBI review of the disclosures.

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 (any scheme other than an AI only fund, a Large Value Fund or an Angel Fund) 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; a first scheme from the date of SEBI registration 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; a first scheme from the date of SEBI registration Not required. CEO and Compliance Officer undertaking instead
Angel Fund Circulation of the Placement Memorandum to investors from the date of SEBI registration Not required. CEO and Compliance Officer undertaking instead

The circular links the relaxation for AI only funds and Large Value Funds to the framework for accredited investors, and the SEBI (Alternative Investment Funds) (Second Amendment) Regulations, 2026 exempt Angel Funds from filing through a merchant banker. A Regular scheme still files through an independent merchant banker, whose due diligence certificate accompanies the filing.

The Naming Requirement Is Not Cosmetic

Any new scheme launched as an AI only scheme must have the words “AI only fund” or “AIOF” added at the end of the scheme name, and any new scheme launched as a Large Value Fund must have “LVF” added at the end. 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’s Role for Regular Schemes

For regular schemes, 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 runs through the merchant banker on the SEBI Intermediary Portal

For regular schemes the Placement Memorandum is filed through a SEBI registered merchant banker on the SEBI Intermediary Portal, with the applicable scheme fee, the merchant banker due diligence certificate in the format at Annexure 6, fit and proper declarations for the AIF, sponsor and manager, sponsor or manager declarations on the minimum continuing interest, and copies of the PANs listed in the circular. The merchant banker needs to be engaged early enough to run its own due diligence before filing.

3. The liability has moved, not vanished

The disclaimer that the circular requires in every Placement Memorandum states that submission to SEBI is not to be construed as approval by SEBI, and that SEBI assumes no responsibility for the accuracy of the disclosures or for the capability and performance of the manager. 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. Merchant banker selection, diligence pack preparation and the fit and proper declarations all have to be complete before filing.

If your investor base is genuinely accredited, the case for structuring as an accredited-investor-only fund just improved materially. Launch on filing (a first scheme from the date of registration), no filing through a merchant banker, no ten-working-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. Cutting the launch clock for Regular schemes from 30 days to 10 working days shortens the distance between a fund’s fundraise and your cheque. Angel Funds, which back the earliest rounds, can circulate their Placement Memorandum from the date of SEBI registration.

For CAs, company secretaries and fund counsel

With no SEBI comment cycle before launch, the advisory work is preparing a filing that survives independent merchant banker diligence on the first pass. The merchant banker certifies that the disclosures are true, fair and adequate and shares responsibility for them with the manager, so prepare for close questions on track record claims, fee and expense disclosures, conflict of interest provisions and related party arrangements.

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. The certificate must be in the format at Annexure 6 to the circular, and the Placement Memorandum must carry the disclaimer clause set out in the circular, naming the merchant banker and the date of its certificate.

When exactly does the framework apply from?

The circular is dated 30 July 2026 and came into force with immediate effect. It applies to Placement Memoranda of all schemes and funds filed with SEBI from the date of notification of the SEBI (Alternative Investment Funds) (Second Amendment) Regulations, 2026. 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 is addressed to all AIFs and all merchant bankers, and its Regular scheme modalities apply to every scheme other than an AI only fund, a Large Value Fund or an Angel Fund, without any carve-out by AIF category. 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 cut the launch clock for Regular schemes to 10 working days on the strength of an independent merchant banker’s certification, and it lets AI only funds and Large Value Funds launch on filing on the strength of the manager’s own undertaking.

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. Source: SEBI circular HO/19/19/11(2)2026-AFD-RAC2/I/17617/2026 dated 30 July 2026, and SEBI Board memorandum on the GARUDA mechanism, sebi.gov.in. Before acting, read the full circular and its annexures on sebi.gov.in. Nothing here is a recommendation to invest in any fund or scheme.

CA Adityavikram Banka
Latest posts by CA Adityavikram Banka (see all)

Stay compliant. Subscribe for weekly updates.

Get tax deadline reminders, regulatory changes, and compliance insights from Tax Update India.

Invalid email address
TaxUpdate.in - No spam, unsubscribe anytime.