MUMBAI: India’s alternative investment fund industry is seeking to widen access to a small but fast-growing pool of wealthy investors, arguing that a cumbersome accreditation system and limited incentives are slowing participation even as the sector scales sharply.
The industry has made a representation to the Securities and Exchange Board of India (Sebi) seeking a simpler accreditation system and stronger regulatory benefits for accredited investors, according to two people aware of the development.
“AIFs made a representation to Sebi last month to make the accreditation process more friendly for investors,” one of the people said on condition of anonymity. “Accredited investors also need proper incentives to grow this segment. As of now, investors don't get a lot if they go through the tiresome process and become accredited.”
At stake is access to a ₹15.75 trillion alternative investment market that has grown rapidly, even as the accredited investor ecosystem remains small.
“If you look at the size of the industry, it stands to reason that there would be a minimum of at least 1 lakh investors in this asset class. Out of 1 lakh, barely 3% have actually made this entire cut,” the first official said.
As of April, Sebi data shows there were 2,773 accredited investors, up from 649 in May 2025. These investors account for about 30% of total AIF investments, which stood at ₹1.91 trillion as of December last year.
Scaling gap
Accredited investors are individuals or entities deemed financially sophisticated enough to take on higher-risk investments. Individuals qualify with an annual income of at least ₹2 crore or a net worth of ₹7.5 crore, with at least half in financial assets, among other criteria. Companies and trusts require a net worth of at least ₹50 crore.
Industry participants say the framework has become difficult to scale because the accreditation process is expensive, repetitive, and operationally heavy.
“Accredited investors have to pay a fee and go through renewing their accreditation every few months. This can discourage them and we have told Sebi about it,” the second official said.
They have sought a reduction in fees and simplification of documentation, including proposals to make the process less paper-intensive.
An emailed query to Sebi did not elicit a response till press time.
Currently, accreditation is handled through Sebi-recognized agencies such as NSDL Database Management Ltd (NDML) and CDSL Ventures Ltd (CVL). Applicants must submit PAN, Aadhaar, income tax returns for the past three financial years, and a chartered accountant’s certificate confirming income and liquid net worth.
For individuals, a three-year certificate costs ₹9,500; for trusts and corporates, ₹28,500, excluding taxes, along with a processing fee of ₹5,000. The same charges apply at renewal.
Industry participants said repeated renewals add to friction. Accreditation is valid for one year if eligibility is met for the preceding year, and two years if met consistently for the past three years, after which investors must reapply with full documentation and fees.
“There are often glitches on the portal, especially the CDSL portal – OTPs don't come through, which makes the process unnecessarily tedious. Most practitioners end up defaulting to NDML,” said Anantha Padmanabha, co-founder of Bloomtree Business Advisors.
He added that direct integration with the income-tax database could reduce duplication. “If ITR data could be pulled automatically, investors wouldn't have to resubmit the same documents every renewal cycle,” he said.
Raising stakes
Beyond easing compliance, AIF managers are also seeking broader regulatory benefits for accredited investors. At present, the primary advantage is a lower minimum ticket size.
“One suggestion made to Sebi is to consider accredited investors as QIBs (qualified institutional buyers) in IPOs,” the first official said. “When you end up actually filing for an IPO, the QIB status gives you higher power. You are not subject to some of the lock-ins. You don't have to bid for the retail or HNI category.”
The industry has also sought relaxation of concentration rules for accredited investor-only funds. Category I and II AIFs may invest up to 25% in a single company, while Category III AIFs are capped at 10%, based on investable funds or net asset value for listed equities.
Another proposal is to extend the accredited investor framework beyond AIFs into other Sebi-regulated products and asset classes. “Sebi should also not limit accredited investors to AIFs. They should extend it to some of the other asset classes regulated by Sebi also,” the person said.
Sebi has already taken incremental steps to ease the framework. In January, it allowed AIF managers to provisionally onboard investors before formal accreditation certificates are issued, subject to conditions. It also removed the requirement for detailed net-worth break-ups alongside certification.
Mint had reported last December that Sebi was evaluating whether AIFs themselves should be allowed to certify accredited investors, similar to practices followed in GIFT City. The regulator had also floated a consultation paper proposing that all KYC registration agencies be allowed to provide accreditation services, though no final decision has been announced.