AIFs seek Sebi help to address inter-regulatory issues and ease norms

The Alternative Investment Funds (AIFs) industry has urged the markets regulator to facilitate an inter-regulatory platform, where all the stakeholders including regulators such as the RBI, IRDAI, could be on-boarded to help address operational hurdles in domestic capital formation.

 

The Indian Venture and Alternate Capital Association (IVCA) made the request during a meeting with the Securities and Exchange Board of India (Sebi) chairman Tuhin Kanta Pandey last week, citing the market regulator’s role as the principal overseer of the industry.  

 

The platform would facilitate inter-regulatory discussions with other financial watchdogs, including the Reserve Bank of India (RBI), the Insurance Regulatory and Development Authority of India (Irdai), and the Pension Fund Regulatory and Development Authority (PFRDA).

 

Sebi has begun consultations with industry players and regulated entities to explore regulatory easing. Key discussions with AIFs include revisiting outdated norms, shifting focus toward accredited investors, and aligning certain regulations with global standards.  

 

“For domestic capital formation, all the stakeholders including regulators such as the RBI, IRDAI-- and entities such as the banks and insurance companies-- have to sync up and that can be led through an inter-regulatory platform where there is a periodicity in discussions. The platform will help AIFs in placing their voice and views if there are any issues on synchronisation,” said Srini Sriniwasan, Managing Director, Kotak Alternate Asset Managers Limited & Vice-Chairperson, IVCA. 

 

The RBI’s December 2023 restrictions on banks and financial institutions investing in AIFs with exposure to debtor firms had initially raised concerns, though the central bank later eased provisioning norms in March 2024.

 

Sriniwasan said that some banks may now struggle to honour capital calls due to the earlier circular.  

 

AIF industry officials believe that such a platform could help address operational hurdles in domestic capital formation. As of March, total AIF commitments stood at ₹13.5 trillion, with fund raises reaching ₹5.63 trillion. Real estate, IT, and financial services remain the top investment sectors.  

 

Another key discussion involves simplifying the registration of accredited investors by leveraging public data infrastructure, such as tax and ownership details from depositories. Accredited investors, deemed to have higher risk appetite and market understanding, are a priority for the industry.  

 

With the evolving AIF landscape, IVCA is also in talks to overhaul older regulations. Sources indicate Sebi has formed a working group to focus on ease of doing business.  

 

Additionally, the industry has suggested aligning norms with global practices. Unlike India’s fund-specific regulations, global frameworks primarily target AIF managers, reducing systemic pressure, officials noted.