GARUDA Mechanism: SEBI allows fast track timelines for AIFs
The Securities and Exchange Board of India (SEBI) has recently decreased the timeline for Alternative Investment Funds (AIFs) to launch new schemes to 10 days, named as GARUDA Mechanism.
Earlier this timeline was 30 days which was three times more than the new timeline approved by SEBI.
On June 19, SEBI proposed a “Green Channel Mechanism for Alternative Investment Funds (AIFs) in India to reduce the timeline of filing their placement memorandums from 30 days to 10 working days, to speed up the work process.
What is GARUDA Mechanism
“GARUDA” or “Green Channel: AIF Rollout Upon Document Acknowledgement” is a mechanism proposed by SEBI to regulate the Processing of Placement Memorandums (PPMs) filed with SEBI so that the fundraising by AIFs become eventually easy.
Under GARUDA Mechanism, Regular AIF Schemes can be launched within 10 working days of filing PPMs with SEBI by a merchant bank, subject to the objections raised by the regulator, if any.
Background behind Introduction of Garuda Mechanism:
Before the 30 days scheme, Registered AIFs were needed to file their schemes with SEBI by a merchant bank.
Then the regulator had to review the disclosures made in PPM, the due diligence certificate issued by the merchant banker and the comments.
Then the fund or the merchant banker was needed to incorporate these comments into the PPM and to submit an updated version of PPM to the regulator and then the launch was expected to be done.
This process was time consuming, so the funds were allowed to share their PPMs to the investor just after 30 days of filing the PPMs with SEBI, so that they don’t have to wait for longer time.
If SEBI provides comment in 30 days, the fund needs to make sure the compliance before sharing the PPMs with the Investor.
This timeline has been decreased to 10 days now from 30 days and the waiting period is completely removed for AI only schemes.
Importance of GARUDA Mechanism
There are 1843 registered AIFs till March 31, 2026 while there were only 732 AIFs five years ago, which made it necessary to introduce fast track mechanism for AIFs.
New schemes will be launched after the AIFs registration and secure approval for PPM of their schemes.
GARUDA Mechanism shall allow the launch from the date of registration or after 10 working days of filing the application.
This new timeline will be applied only after the registration of AIFs and obtaining approval for PPM.
Malaysia’s securities market regulator introduced a principle of the “lodge and launch” framework around more than 10 years ago. This framework is followed by GARUDA mechanism also.
Conclusion
GARUDA Mechanism helps in speeding up the working of SEBI and the launch of AIFs schemes. This green channel mechanism shall compel AIFs to launch new schemes within 10 working days of filing their PPM with SEBI.
This initiative is part of SEBI’s efforts to improve the working time and business efficiency of AIF sector.
FAQ - CorpZo
Q1: What is the GARUDA Mechanism introduced by SEBI for AIFs?
Answer:: The GARUDA Mechanism is a regulatory initiative that helps eligible Alternative Investment Funds receive faster processing and review timelines. It supports efficient fund setup while maintaining SEBI compliance requirements.
Q2: Who can benefit from the GARUDA Mechanism for AIF registration in India?
Answer:): Fund managers, venture capital firms, private equity funds, family offices, and investment professionals seeking AIF registration in India may benefit if they meet SEBI's eligibility conditions and documentation requirements.
Q3: How does the GARUDA Mechanism help reduce AIF registration timelines?
Answer: The GARUDA Mechanism streamlines the review process by enabling quicker regulatory assessment of eligible applications. This can help investment funds plan fundraising and operational activities more effectively.
Q4: What documents are generally required under the GARUDA Mechanism process?
Answer:: Applicants typically need constitutional documents, investment strategy details, sponsor information, manager details, compliance declarations, and other supporting records required by SEBI for fund registration review.
- Fund structure details
- Sponsor and manager information
- Investment objectives
- Regulatory declarations
Q5: Why should businesses monitor updates related to the GARUDA Mechanism?
Answer:: Regulatory changes can directly affect fund formation timelines, compliance planning, and investment launches. Staying updated helps AIF applicants make informed decisions and align with current SEBI expectations across India.