SEBI AIF Regulations — the rules governing Alternative Investment Funds in India
What are the SEBI AIF Regulations?
The SEBI (Alternative Investment Funds) Regulations, 2012 govern privately pooled investment vehicles in India. They define three categories of fund, set a ₹1 crore minimum investment, cap a scheme at 1,000 investors, and require registration before a fund may raise money. SEBI has amended them repeatedly, most recently on 18 November 2025.
What the regulations do
The SEBI (Alternative Investment Funds) Regulations, 2012 created a single registration regime for privately pooled investment vehicles in India. Before them, venture capital funds sat under a separate regime and much of the rest of the private-markets industry sat outside SEBI's perimeter altogether.
A fund must register before it raises money. Registration produces a number in
the form IN/AIF{1,2,3}/{financial year}/{serial}, and the digit after AIF
records which of the three categories the fund belongs to. You can see the
current register in the fund directory.
The three categories
| Category | What it covers | Leverage | Structure |
|---|---|---|---|
| Category I | Venture capital, angel, SME, social impact, infrastructure, special situation funds | No | Close-ended |
| Category II | Everything that is neither I nor III — private equity, private credit | Operational only | Close-ended |
| Category III | Complex or diverse trading strategies, including long-short | Permitted, within SEBI limits | Open or close-ended |
Category II dominates. Of the total commitments Indian AIFs have raised, Category II accounts for the large majority — the current split by category is on the SEBI quarterly data page, which carries SEBI's own figures with the quarter they refer to.
Who can invest, and how much
The minimum investment in an AIF is ₹1 crore. Employees and directors of the fund, and employees and directors of its manager, may invest ₹25 lakh, on the reasoning that they are insiders rather than distributed investors.
A large value fund is one in which every investor is accredited and commits at least ₹25 crore. SEBI cut that threshold from ₹70 crore on 18 November 2025, which materially widens the pool of investors who can access the relaxations that come with it.
A scheme may not have more than 1,000 investors. That cap is what keeps an AIF a private placement rather than a public offer, and accredited investors are excluded from the count in Accredited Investors Only AIFs.
Tenure, and why it matters
Category I and Category II AIFs must be close-ended, with a tenure fixed at launch and extendable only with investor consent. Category III may be open-ended. That difference follows from what each category holds: unlisted positions take years to realise, and a fund holding them cannot offer redemption without either gating or fire-selling.
The private placement memorandum
Every AIF issues a private placement memorandum setting out strategy, terms, fees, risks and conflicts. SEBI prescribes a template for most funds and requires filing through a merchant banker.
The PPM is not a public document. This is the single most consequential fact about AIF disclosure in India, and it is why AIF performance cannot be compared the way portfolio management service performance can.
The amendments that changed things
1 May 2023 — distribution and direct plans. SEBI restructured how distributors may be paid and made direct plans mandatory. Category III AIFs moved to all-trail commission with no upfront payment. The detail is in AIF distributor commission.
18 November 2025 — the third amendment. SEBI created the Accredited Investors Only AIF, cut the large value fund threshold from ₹70 crore to ₹25 crore per investor, and granted a set of relaxations to funds whose investors are all accredited. That amendment has its own page, because almost nobody has written it up for an investor audience.
What the regulations do not do
They do not require public performance disclosure. They do not standardise how returns are calculated or presented. They do not create a public database of fund size, fees or minimum ticket beyond the registration record.
So an investor comparing two AIFs cannot do what an investor comparing two PMS strategies can. That is a feature of the regime rather than a gap in this site, and any source presenting a ranked table of Indian AIF returns has built it from numbers nobody is obliged to publish or verify.
Recent changes
- 30 July 2026 — the GARUDA mechanism: regular schemes launch ten working days after filing; accredited-investor-only funds, large value funds and angel funds launch on filing.
- 14 July 2026 — SEBI (Alternative Investment Funds) (Second Amendment) Regulations, 2026, Gazette Notification CG-MH-E-14072026-274483.
- 4 March 2026 — reporting framework revised: an Annual Activity Report replaces the detailed quarterly regime, with a lighter quarterly report for the June, September and December quarters.
- 18 November 2025 — accredited-investor-only funds and the cut in the large value fund threshold from ₹70 crore to ₹25 crore.
SEBI publishes the consolidated text and every circular at sebi.gov.in.
Checked against source on 24 August 2026. This page is information, not legal, tax or investment advice.