SEBI introduces targeted changes to governance, compliance and operational framework for Alternative Investment Funds
Meetu Kumari | Apr 22, 2026 |
SEBI reduces Minimum Investment for Social Impact Funds: Know More
The Securities and Exchange Board of India (SEBI) notified the SEBI (Alternative Investment Funds) (Amendment) Regulations, 2026 on April 16, 2026. These amendments update the 2012 framework to lower entry barriers for social sector investors and provide the regulator with enhanced tools to manage inactive funds.
The Key Changes are as follows:
| Regulation | Subject Matter | Earlier Position | Amended/New Position |
| Regulation 10(c) | Minimum Investment in Social Impact Funds | Individual investors were required to invest a minimum of two lakh rupees in Social Impact Funds (NPO focused). | The minimum investment value has been drastically reduced to one thousand rupees. |
| Regulation 29(7) | Winding Up & Liability Satisfaction | Assets were liquidated and proceeds distributed to investors after satisfying all liabilities. | Distribution of proceeds after satisfying liabilities is now subject to additional conditions as specified by SEBI. |
| Regulation 10A | Fund Activity Status | No specific provision existed to formally categorize a fund as “inoperative.” | New Provision: SEBI may now tag an AIF as an “inoperative fund” based on specified conditions and procedures. |
Reduction in Minimum Investment for Social Impact Funds:
Under the third proviso to Regulation 10(c), the minimum investment requirement for individual investors in Social Impact Funds (specifically those investing in not-for-profit organizations) has been reduced. The threshold has been slashed from two lakh rupees to just one thousand rupees, facilitating significantly greater retail participation in social ventures.
Conditional Distribution During Winding Up:
In Regulation 29(7), which governs the liquidation of assets, the earlier position required proceeds to be distributed to investors immediately after satisfying all liabilities. The amended regulation now specifies that such distributions are subject to additional conditions as may be prescribed by the Board from time to time, granting SEBI greater oversight during the fund’s exit phase and ensuring a more controlled process.
Introduction of ‘Inoperative Fund’ Status:
A new provision, Regulation 10A, has been inserted to address the previous lack of a formal mechanism to categorize inactive funds. This empowers SEBI to formally tag an Alternative Investment Fund as an “inoperative fund” based on specified conditions. This change allows for more accurate tracking of active market participants and prevents administrative clutter by identifying dormant investment vehicles.
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