India’s startup funding ecosystem is set to become faster and more efficient after the Securities and Exchange Board of India (SEBI) approved the GARUDA mechanism during its 214th Board Meeting on June 19, 2026.
The new framework is designed to reduce delays in launching Alternative Investment Fund (AIF) schemes and make fundraising easier for venture capital funds, angel funds, and other investment vehicles that support startups. By simplifying approvals and cutting waiting periods, SEBI aims to improve the ease of doing business in India’s private investment market.
The reform comes at a time when the AIF industry is growing rapidly. Over the last five years, the number of registered AIFs has increased significantly, while the amount of money committed to these funds has also reached record levels. As the industry expanded, SEBI faced a growing number of applications, leading to longer processing times for new fund launches.
GARUDA Creates Faster Approval Routes for AIFs
Under the GARUDA framework, SEBI has introduced three different routes for launching AIF schemes depending on the type of investors they target.
For regular AIF schemes that include non-accredited investors, the existing filing process will continue through SEBI-registered Merchant Bankers. However, the waiting period has been reduced considerably. Earlier, fund managers had to wait 30 days after filing documents before launching a scheme. Under the new rules, they can now launch after just 10 working days.
A much faster route has been introduced for schemes that are open only to Accredited Investors. These investors are considered financially experienced and capable of understanding investment risks on their own.
Such schemes will no longer need a Merchant Banker’s due diligence certificate. Instead, the fund manager’s CEO and Compliance Officer will provide an internal undertaking confirming that all rules have been followed. Once the documents are filed with SEBI, these schemes can be launched immediately.
Angel Funds have also received a major boost under the new framework. These funds, which invest in early-stage startups, can now onboard only Accredited Investors and use the same fast-track process. They can begin fundraising and share investment documents as soon as they receive SEBI registration.
Why SEBI Introduced the GARUDA Framework
The GARUDA mechanism was introduced to address growing challenges within India’s rapidly expanding AIF industry.
The number of AIFs has more than doubled in recent years, resulting in a large number of scheme applications waiting for approval. This often delayed fundraising and investment activities.
At the same time, India has seen a sharp increase in Accredited Investors. Their growing participation in AIFs encouraged SEBI to create a separate framework that allows sophisticated investors to access investment opportunities more quickly without lengthy regulatory procedures.
The regulator believes that experienced investors do not require the same level of upfront protection as retail participants. As a result, GARUDA focuses on speeding up approvals while still maintaining accountability and transparency.
The framework is also expected to bring India closer to global standards followed in other financial markets, where regulators rely more on disclosures and post-launch monitoring rather than lengthy pre-approval processes.
More Responsibility for Fund Managers
While the new system makes fundraising faster, it also places greater responsibility on fund managers.
Instead of checking every scheme before launch, SEBI will now conduct post-facto reviews and inspect schemes on a risk-based basis. This means fund managers must ensure that all information provided to investors is accurate and compliant with regulations.
If SEBI finds misleading disclosures, compliance failures, or other violations after a scheme has already launched, strict regulatory action may be taken against the fund and its management.
Industry experts have largely welcomed the move. Many believe the new framework will reduce operational costs, speed up fundraising, and help fund managers take advantage of investment opportunities more quickly. Venture capital and angel investors are also expected to benefit from faster deal execution and smoother capital deployment.
Along with GARUDA, SEBI has introduced other important reforms for the AIF industry. The regulator recently updated its AIF Master Circular and launched the new “Inoperative Fund” framework, which provides relief to funds that cannot close due to pending legal, tax, or regulatory matters.
Together, these reforms reflect SEBI’s efforts to modernise India’s private investment ecosystem. For startups, investors, and fund managers, the GARUDA mechanism could play a key role in making fundraising faster, simpler, and more efficient in the years ahead.