SEBI to widen AIF investor pool, targets 4 lakh accredited investors

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SEBI proposes easing the eligibility criteria for accredited investors | Photo Credit: The Hindu

The Securities and Exchange Board of India (SEBI) is likely to issue a circular shortly to expand the framework for alternative investment funds (AIFs), including provisions to recognise assets with high growth potential, said Sandip Pradhan, whole-time member of the market regulator.

“The revised framework is evolving, we already had a board meeting and very soon we will be coming out with a circular that we are also adding one more aspect, that is the assets of high growth or movement in the security market,” Mr. Pradhan said at the Confederation of Indian Industry (CII) Alternative Investments Summit in Mumbai.

The inclusion is expected to expand the pool of accredited investors in the AIF industry to 4 lakh from the current 1 lakh, he added.

AIFs are privately pooled investment vehicles that raise capital from institutional investors and high-net-worth individuals to invest in alternative asset classes, including unlisted securities and other non-traditional investments. Given their exposure to complex and potentially illiquid assets, they carry higher risks and are subject to a regulatory framework distinct from that governing retail investment products.

SEBI’s August 2026 consultation paper proposes easing the eligibility criteria for accredited investors. Under Proposal 6, individuals with at least ₹5 crore and companies with at least ₹20 crore invested in securities could qualify, with electronic consolidated account statements (eCAS) or broker statements accepted as proof.

Other proposals include allowing investment managers to onboard clients directly and automatically recognising certain non-resident investors, including foreign portfolio investors (FPIs) and portfolio investors resident outside India (PROIs), as accredited investors.

Former SEBI chairman UK Sinha highlighted the transformation of India’s alternative investment industry over the past decade, noting the government’s role in providing capital through fund-of-funds structures and fostering a collaborative ecosystem for public-private risk capital.

However, he cautioned that investments must deliver wider social and economic benefits, warning that a perception of returns taking precedence over public welfare could expose the industry to regulatory and political headwinds.

“In India, there is already some demand, some noise being raised about the entry of private equity investment in the hospitals,” Mr. Sinha said.

“Is the private equity investment leading to addition of beds, addition to better facilities, addition to better clinical outcomes? Or is it only coming to more and more returns at the cost of patient care? If the conception gives ground that the second part of the alternative is true, then there will be headwinds,” he said.

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