SEBI AIF Master Circular June 2026: Key Changes & Updates

SEBI issued its updated Master Circular for Alternative Investment Funds (AIFs) on 03 June 2026, consolidating every circular, clarification, and regulatory change issued under the SEBI (Alternative Investment Funds) Regulations, 2012 up to 31 May 2026. The document runs 153 pages across 25 chapters and supersedes the previous Master Circular dated 07 May 2024. A mid-month update on 16 June 2026 inserted Chapter 25, covering guidelines for winding up with respect to retention of proceeds and a new “Inoperative Fund” status framework. Together, these represent the most substantive revision to the AIF regulatory architecture in two years, touching fund registration, angel fund structures, co-investment frameworks, overseas investments, winding-up mechanics, and compliance reporting.

What does the June 2026 AIF Master Circular consolidate?

The June 2026 Master Circular is the second comprehensive consolidation SEBI has issued for AIFs, the first being the May 2024 version. It incorporates all circulars and amendments issued between 01 April 2024 and 31 May 2026, including the September 2025 angel fund reform, the co-investment framework circular of September 2025, the borrowing flexibility circular of August 2024, and the angel fund overhaul triggered by the amendment to AIF Regulations notified on 09 September 2025. The June 16 addendum further incorporated the winding-up and retention-of-proceeds framework.

Practically, the circular serves one purpose: every direction, instruction, and clarification that previously existed as a standalone document now lives inside this Master Circular. Once issued, all those underlying circulars stand rescinded to the extent they relate to AIFs (as listed in Annexure 24). Anything done or any liability accrued under those rescinded circulars is preserved. The rescission is forward-looking, not retroactive.

For fund managers, this means the Compliance Test Report (CTR) prepared annually under para 21.2 of the circular must now test compliance against all 25 chapters of this single document, not the scattered set of individual circulars. SEBI has made this explicit in para 6 of the covering letter signed by Deputy General Manager Anshul Goyal.

Table 1: Key circulars absorbed into the June 2026 Master Circular

Topic	Source circular absorbed	Original date
Angel Fund overhaul	SEBI/HO/AFD/AFD-POD-1/P/CIR/2025/128	10 Sep 2025
Co-investment via CIV scheme	SEBI/HO/AFD/AFD-POD-1/P/CIR/2025/126	09 Sep 2025
Borrowing for drawdown shortfall	SEBI/HO/AFD/AFD-POD-1/P/CIR/2024/112	19 Aug 2024
Dissolution period framework	SEBI/HO/AFD/PoD-I/P/CIR/2024/026	26 Apr 2024
Dematerialisation of investments	SEBI/HO/AFD/PoD-1/P/CIR/2025/17	14 Feb 2025
Winding up and inoperative fund	HO/19/34/11(2)2026-AFD-POD1/I/13764/2026	16 Jun 2026

What are the new NISM certification requirements for AIF personnel?

Every SEBI-registered AIF must now have at least one member of the key investment team holding the prescribed NISM certification, and this is an eligibility criterion, not a post-registration obligation. The certification requirement was introduced through a Gazette Notification dated 25 June 2025 (No. SEBI/LAD-NRO/GN/2025/249) and is now codified in Chapter 1 of the Master Circular under para 1.2.

The specific certifications required vary by AIF category:

• Category I and Category II AIF managers: at least one key personnel must hold either NISM Series-XIX-C (Alternative Investment Fund Managers) or the newly notified NISM Series-XIX-D (Category I and II Alternative Investment Fund Managers) as per NISM communiqué dated 29 April 2025.
• Category III AIF managers: at least one key personnel must hold NISM Series-XIX-C or NISM Series-XIX-E (Category III Alternative Investment Fund Managers) as per NISM communiqué dated 29 April 2025.

This applies to all fresh registration applications and to launch of new schemes. Existing registered AIFs are not exempt from ensuring new scheme launches meet this threshold.

On the compliance officer side, a separate but related change under para 17.1.1 requires that compliance officers obtain the NISM Series-III-C: Securities Intermediaries Compliance (Fund) Certification. The deadline is hard: from 01 January 2027, only certified persons may act as compliance officers for managers of AIFs. Fund managers who have not already identified and initiated their compliance officer certification should treat this as an urgent operational item. The NISM communiqué was dated 20 November 2025.

Thinking about setting up an AIF or launching a new scheme? Treelife’s AIF registration and structuring services cover entity structuring, PPM drafting, and SEBI filing support from day one.

How has the angel fund framework changed after the September 2025 AIF Regulation amendments?

The September 2025 amendments to AIF Regulations completely rewrote the angel fund framework under Chapter III-A, and Chapter 8 of the Master Circular maps the resulting operational obligations. The changes are material and several have near-term compliance deadlines.

Fund raising: transition to accredited investors only

Angel funds registered post 10 September 2025 must raise from accredited investors (AIs) only. Existing angel funds registered on or before 10 September 2025 have a transition window but must comply by 08 September 2026. From that date, they cannot accept contribution for any new investment from non-accredited investors. During the transition period, they are capped at not more than 200 non-accredited investors. Existing investors’ holdings are preserved under the original Private Placement Memorandum terms.

First close deadline

The first close of an angel fund must be declared no later than 12 months from the date the AIF becomes eligible to launch its scheme (per para 2.4.1). Angel funds that had not declared first close as of 10 September 2025 must do so by 08 September 2026. If this deadline is missed, the fund must refile with SEBI and pay the requisite fee.

Investment mechanics: no more term sheet filing

Angel funds no longer need to file a term sheet with SEBI for each investment. Investments are made directly at fund level without launching a scheme. However, managers must maintain internal records of term sheets and investor participation for each investment. The removal of scheme-level filing simplifies operations but increases the internal recordkeeping burden.

Follow-on investments in non-startup investees

Angel funds may now make follow-on investments in existing investee companies that are no longer startups, subject to:

• Post-issue shareholding of the angel fund does not exceed pre-issue shareholding percentage.
• Total investment per investee company (including follow-ons) does not exceed ₹25 crore.
• Follow-on participation is limited to investors who contributed to the original investment, pro-rata to their existing contribution.

Lock-in period

Investments are subject to a one-year lock-in. Where exit is by sale to a third party (excluding buyback by the investee company or purchase by its promoters/associates), the lock-in reduces to six months.

PPM audit threshold

The annual PPM compliance audit, which applies broadly to AIFs, applies to angel funds only if total investments at cost exceed ₹100 crore. Funds below that threshold are exempt from the audit but must still report to performance benchmarking agencies from FY 2025-26 onwards.

Table 2: Angel fund, old vs new framework (post-September 2025)

Parameter	Pre-September 2025	Post-September 2025
Investor eligibility	Any eligible investor	Accredited Investors only (transition deadline: 08 Sep 2026)
Investment route	Via scheme for each investment	Directly at fund level, no scheme required
Term sheet filing with SEBI	Required for each investment	Discontinued
First close deadline	12 months from registration	12 months from eligibility to launch
Follow-on in non-startup investees	Not permitted	Permitted with conditions
Lock-in	1 year (all exits)	1 year; 6 months for third-party sale
PPM audit	All angel funds	Only if total investments exceed ₹100 crore
Category classification	Sub-category under Category I Venture Capital Fund	Standalone Category I AIF, Angel Fund

What is the new co-investment framework via CIV schemes?

SEBI introduced a formal co-investment route through Co-Investment Vehicle (CIV) schemes via a September 2025 circular, which is now consolidated in Chapter 6. Category I and Category II AIFs may offer co-investment to accredited investors by launching a separate CIV scheme within the AIF Regulations. This is in addition to the existing co-investment route through Co-Investment Portfolio Managers under SEBI (Portfolio Managers) Regulations, 2020.

Key operational constraints on CIV schemes:

• Managers must file a shelf placement memorandum (template at Annexure 10) covering principal terms, governance structure, and the regulatory framework for co-investments.
• Each CIV scheme requires a separate bank account and demat account; assets must be ring-fenced from the main scheme.
• An investor’s co-investment across CIV schemes in a particular investee company cannot exceed three times the contribution made by that investor in the main scheme’s investment in the same investee company. This 3x cap does not apply to multilateral or bilateral development financial institutions, state industrial development corporations, or entities owned or controlled by central/state governments or foreign governments (including central banks and sovereign wealth funds).
• CIV schemes cannot borrow funds or use any form of leverage.
• If an investor was excused, excluded, or defaulted on a main scheme investment, they cannot co-invest in that same investee company through a CIV scheme.
• The CIV scheme must not facilitate investments that an investor could not make directly. It cannot be used to route around regulatory restrictions.

Expenses are shared between the main scheme and the CIV scheme proportionately based on the ratio of their investments. Carried interest arrangements with managers or sponsors are permitted but must follow the usual disclosure norms.

The Standard Setting Forum for AIFs (SFA), in consultation with SEBI, will formulate implementation standards to ensure co-investments are made for bona fide purposes. These standards are published on the websites of IVCA, PE VC CFO Association, and Trustee Association of India.

Does the July 2025 dematerialisation deadline still apply?

Yes. Para 11.6 of the Master Circular is explicit: any investment made by an AIF on or after 01 July 2025 must be held in dematerialised form only, irrespective of whether the investment is made directly or acquired from another entity. There is no category-based carve-out.

Investments made before 01 July 2025 are grandfathered, with two exceptions:

• The investee company has been mandated under applicable law to facilitate dematerialisation of its securities.
• The AIF, alone or jointly with other SEBI-registered intermediaries/entities mandated to hold investments in demat form, exercises control over the investee company (as defined under Regulation 2(1)(f) of AIF Regulations).

This means any new investment closed on or after 01 July 2025 must run through a custodian and be held in demat from day one. For early-stage investments in companies that are not yet eligible for demat issuance, managers should take legal advice on structuring and timing.

What has changed in quarterly and annual reporting obligations?

Chapter 21 of the Master Circular rationalises the reporting obligations and introduces a new quarterly cadence. Fund managers who have not already built a structured compliance calendar will find the new QAR obligation creates an immediate gap.

Quarterly Activity Report (QAR)

AIFs must now submit a limited Quarterly Activity Report (QAR) on the SEBI Intermediary (SI) Portal within 15 calendar days from the end of each quarter. The first report is due for the quarter ending 30 June 2026, meaning AIFs have until 15 July 2026 to file the inaugural QAR. No separate QAR is required for the March quarter of each year, as the Annual Activity Report (AAR) for that quarter captures all QAR data points.

Annual Activity Report (AAR)

The AAR continues to be filed within 30 calendar days from the end of March each year, covering the full financial year.

Compliance Test Report (CTR)

The CTR, prepared by the manager and covering compliance with all provisions of the Master Circular, continues on an annual cycle. It must be submitted to the trustee (in case the AIF is a trust) or sponsor within 30 days of the financial year end. The trustee/sponsor then has 30 days to raise observations, and the manager has a further 15 days to respond. AI-only funds are exempt from the trustee/sponsor review loop. They prepare the CTR and report any violations directly to SEBI.

PPM audit timeline

The annual audit of compliance with terms of PPM must be completed at the end of each financial year, with findings communicated to the trustee/board/designated partners and SEBI within 6 months from year end (i.e., by 30 September for FY-end March 31 AIFs).

Table 3: Reporting calendar for AIFs, key deadlines

Report	Frequency	Deadline	Filed via
Quarterly Activity Report	Quarterly	Within 15 days of quarter end	SI Portal
Annual Activity Report	Annual	Within 30 days of March 31	SI Portal
Compliance Test Report	Annual	Within 30 days of FY end	To Trustee/Sponsor
PPM Audit Report	Annual	Within 6 months of FY end	SI Portal
Performance Benchmarking data (Sep)	Half-yearly	Within 45 days of Sep 30	Benchmarking Agency
Performance Benchmarking data (Mar)	Half-yearly	Within 7 months of Mar 31	Benchmarking Agency

For help building a compliance calendar or running the annual PPM audit, Treelife’s AIF regulatory compliance practice works with managers across Category I, II, and III funds.

How do the winding-up and dissolution period rules work in 2026?

Chapters 23 and 24 consolidate the winding-up architecture that SEBI built through the 2023 and 2024 circulars. The framework provides three routes for dealing with unliquidated investments at end of fund life: in-specie distribution, dissolution period, and mandatory write-off. Each has specific consent thresholds, bid requirements, and performance track record implications. Managers who built these exit pathways into their fund structuring at the outset are better placed to execute cleanly.

Dissolution period

An AIF can opt for a dissolution period after the liquidation period expires, subject to 75% investor consent by value. Before seeking that consent, the manager must arrange a bid for at least 25% of the value of unliquidated investments. If this bid is arranged successfully, dissenting investors get a full exit option from that bid pool. If the manager cannot arrange the minimum 25% bid, the AIF can still enter dissolution period with 75% investor consent, but the unliquidated investments are marked at ₹1 (one rupee) for track record and benchmarking purposes, not at any intrinsic or indicative value.

No management fee can be charged during the dissolution period.

If investments remain unsold at the end of the dissolution period, they must be distributed in-specie mandatorily. No further extension or additional liquidation period is available after dissolution period expires.

In-specie distribution during liquidation period

If the AIF decides to distribute unliquidated investments in-specie during the liquidation period (rather than opting for dissolution), it must again obtain 75% investor consent and arrange a minimum 25% bid. Dissenting investors (those who did not consent) must be offered a full exit out of the bid proceeds. The bid value determines the track record value if the 25% bid is arranged; if not, investments are again marked at ₹1.

Mandatory in-specie distribution

If the AIF fails to obtain 75% consent for either the dissolution period or voluntary in-specie distribution, the unliquidated investments must be mandatorily distributed in-specie, with no consent required. These investments are valued at ₹1 for benchmarking purposes. If any investor refuses to accept the in-specie distribution, those investments are written off entirely.

One-time additional liquidation period

For schemes whose liquidation period had expired or was expiring within three months of the date of notification of the SEBI (AIF) Second Amendment Regulations 2024, a one-time additional liquidation period was granted. For migrated VCF schemes, this window runs until 19 July 2026 (one year from the date of AIF Regulation notification on 20 July 2024). Funds approaching this deadline should immediately assess their unliquidated holdings.

Liquidation schemes: no new launches

No new liquidation scheme can be launched post 25 April 2024. Liquidation schemes launched before that date continue to be governed by Regulation 29A until they are wound up, and must operate under the terms specified in para 23.7 of the Master Circular.

What is the new ‘Inoperative Fund’ status under Chapter 25?

Chapter 25 was added on 16 June 2026 via circular no. HO/19/34/11(2)2026-AFD-POD1/I/13764/2026. It addresses a practical problem that has affected several AIFs: the fund’s investments are fully wound up, but the manager cannot surrender registration because it is waiting on a tax demand, litigation outcome, or the resolution of winding-up expenses. Previously, there was no formal mechanism for this. The fund was technically still live, subject to full regulatory obligations, even if dormant.

Retention of proceeds beyond permissible fund life

AIFs or schemes may now retain liquidation proceeds beyond the liquidation period or dissolution period (collectively, “beyond permissible fund life”) if at least one of the following conditions is met:

• A demonstrable litigation notice or demand has been received, including official communications from tax authorities, regulatory bodies, courts, or counterparties. This includes show-cause notices, re-assessment notices, and investigation summons. It is not restricted to crystallised demand notices.
• At least 75% of investors by value have consented to retention because of anticipated (but not yet crystallised) liabilities from a possible/probable litigation or tax demand.
• Residual winding-up operational expenses are supported by invoices, comparable historical expense records, or other substantiation. The retention period for this reason cannot exceed three years from the end of permissible fund life.

All retained monies must be invested as per Regulation 15(1)(f) of AIF Regulations (i.e., in liquid assets such as money market instruments and government securities). Once liabilities are satisfied and proceeds are distributed, the scheme must be wound up under Regulation 29.

Applying for Inoperative Fund status

An AIF that has one or more schemes with retained proceeds and wishes to surrender registration can apply for “Inoperative Fund” status by emailing the prescribed format (Annexure 21) to inoperativeaif@sebi.gov.in. An AIF whose schemes have not retained proceeds but wants to stay registered solely to await a favourable litigation outcome may also apply.

Once tagged as an Inoperative Fund:

• No new schemes can be launched.
• No management fees may be charged on any scheme.
• Retained monies must be invested in Regulation 15(1)(f) instruments.
• Several regulatory requirements are waived (listed in Annexure 22 of the Master Circular), reducing the compliance burden substantially.
• An annual status report on retained monies and outstanding liabilities (format at Annexure 23) must be filed on SI Portal within 30 days of March 31 each year.

The fund can apply for surrender of its certificate of registration only after all liabilities are satisfied and all retained monies are distributed to investors across every scheme.

Applicability to VCFs

This framework extends to Venture Capital Funds registered under the erstwhile SEBI (Venture Capital Funds) Regulations, 1996. VCFs tagged as Inoperative Funds follow the same regulatory framework as AIFs in this regard.

This is the most practically useful addition in the entire June 2026 update for fund managers who are stuck in limbo with closed portfolios but open-ended tax disputes.

Are there changes to Category III AIF leverage and operational norms?

Category III AIF norms in Chapter 7 remain structurally unchanged, but a clarification in para 7.2.8 points to the newly issued SEBI Master Circular for Mutual Funds (Circular No. HO/24/13/11(1)2026-IMD-POD-1/I/7602/2026 dated 20 March 2026) for the treatment of offsetting positions for hedging and portfolio rebalancing. Category III AIFs must now align their leverage calculation with the mutual fund circular’s framework when applying permitted offsets.

The leverage cap remains: 2x NAV. The formula stays:

Leverage = Total exposure {Longs + Shorts (after offsetting as permitted)} / NAV

Open-ended Category III AIF schemes with corpus breaching ₹20 crore must continue to follow the breach and rectification timeline under para 7.6: intimate SEBI within 2 working days of redemption request triggering the breach, and restore corpus within 3 months.

What are common compliance mistakes AIF managers should avoid after this circular?

Mistake 1: Treating the circular as a consolidation-only update

Because the June 2026 Master Circular supersedes the 2024 version, managers sometimes assume all the new content is simply a reshuffling of existing rules. Three genuinely new provisions were introduced: the CIV scheme co-investment framework (Chapter 6), the inoperative fund status (Chapter 25), and the quarterly reporting obligation (para 21.1.2). Missing these means operating without awareness of new obligations and new relief mechanisms.

Mistake 2: Assuming the NISM certification requirement is post-registration only

The certification requirement under para 1.2.3 is an eligibility criterion for registration and for scheme launch. If your current key investment team member holding the certification resigns after the first close of a scheme, you must ensure another member obtains it before launching a subsequent scheme. SEBI has made this explicit.

Mistake 3: Failing to track the Angel Fund transition deadline

Existing angel funds have until 08 September 2026 to stop accepting contribution from non-accredited investors. This is not the date by which existing non-accredited investor holdings must be redeemed. Those investors keep their units. But any new contribution call for a new investment made on or after 08 September 2026 can only go to accredited investors. Managers who do not build this gating mechanism into their contribution call process before that date will be in violation from day one.

Mistake 4: Ignoring the quarterly reporting timeline

The first QAR is due by 15 July 2026 for the quarter ending 30 June 2026. Many managers are unaware this obligation exists at all given it was introduced through a March 2026 circular. The reporting format is available on IVCA’s website; managers should pull it now and begin building the data pipeline.

Mistake 5: Entering dissolution period without seeking external bids

Under para 23.1.1, arranging a minimum 25% bid is a prerequisite before seeking investor consent for dissolution period. Managers who jump directly to the consent process without the bid step are non-compliant. The bid must be for units representing the consolidated value of all unliquidated investments, and the manager may use multiple bidders to meet the 25% threshold.

Treelife practitioner note

In the AIF engagements we have run at Treelife, across Category I infrastructure and venture capital funds, Category II PE funds, and Category III long-short funds, the winding-up and retention-of-proceeds framework introduced in Chapter 25 addresses a genuine operational gap we have seen play out repeatedly. A fund completes its final distribution, the last investment is sold, and then a tax reassessment notice arrives three years later claiming short-term capital gains treatment on a secondary transaction that the fund had classified as long-term. The manager cannot surrender registration. The trustee is asking to step down. The compliance officer is still billing. Under the old regime, this was entirely unresolved. The fund simply stayed registered with all its obligations intact.

The new Inoperative Fund mechanism allows the manager to retain the proceeds attributable to the disputed tax amount, invest them in liquid instruments per Regulation 15(1)(f), file annually against a simplified template, and be exempt from the bulk of the compliance requirements that apply to active funds (listed in Annexure 22). This is a material improvement.

Where it still needs attention: the implementation standards for standardising which operational expense heads qualify for the three-year retention window under para 25.2.1(c) are to be formulated by SFA in consultation with SEBI. Until those standards are published on IVCA, PE VC CFO Association, and Trustee Association of India websites, managers have limited certainty on what constitutes acceptable winding-up operational expenses. We are advising our fund clients to document every residual expense category with invoices and comparable historical data from prior winding-up cycles, as a conservative buffer until the standards are formalised.

One more thing that practitioners should watch: the Inoperative Fund tag cannot be obtained if the AIF has an existing investor complaint pending with SEBI/SCORES regarding non-receipt of funds or securities. Clearing investor grievances before applying is non-negotiable. In our experience, long-running funds sometimes have dormant investor complaints that were never formally closed on SCORES.

FAQs

Q: What is the SEBI AIF Master Circular June 2026?
A: It is SEBI’s consolidated regulatory framework for all SEBI-registered AIFs, issued on 03 June 2026 (updated 16 June 2026), superseding the May 2024 Master Circular. It covers all 25 chapters of AIF compliance obligations, from registration and PPM filing to winding up and the new Inoperative Fund status, and rescinds all individual circulars listed in Annexure 24 to the extent they relate to AIFs.

Q: Which circulars does the June 2026 Master Circular supersede?
A: The full list is in Annexure 24 of the Master Circular. It supersedes all standalone circulars issued up to 31 May 2026 under SEBI (AIF) Regulations, 2012, including the May 2024 Master Circular. The June 16 winding-up circular (HO/19/34/11(2)2026-AFD-POD1/I/13764/2026) was additionally incorporated as Chapter 25.

Q: What is the NISM certification deadline for compliance officers?
A: Compliance officers of AIF managers must obtain NISM Series-III-C: Securities Intermediaries Compliance (Fund) Certification. From 01 January 2027, only certified persons may act as compliance officers. The certification requirement for key investment team members is already applicable to all new registration applications and scheme launches.

Q: What is the new Inoperative Fund status for AIFs?
A: An AIF that has completed its investment and distribution activities but cannot surrender its registration due to pending tax demands, litigation, or residual winding-up expenses may apply for Inoperative Fund status by emailing Annexure 21 format to inoperativeaif@sebi.gov.in. Once tagged, the fund faces no new scheme launch restriction, no management fee obligation, and a substantially reduced compliance obligation set as per Annexure 22. It must file an annual retention status report within 30 days of March 31 every year.

Q: What is the deadline for the first quarterly activity report?
A: The first Quarterly Activity Report must be filed on SI Portal by 15 July 2026, covering the quarter ending 30 June 2026. No QAR is required for the March quarter since the Annual Activity Report covers that period.

Q: Can Category I and II AIFs now borrow to meet investor drawdown shortfalls?
A: Yes, under para 14.1.3, Category I and II AIFs may borrow to meet shortfall in drawdown amount from investors, subject to conditions: the intent to borrow must be disclosed in the PPM; borrowing occurs only when an investment opportunity is imminent and a drawdown call has not been honoured; the borrowed amount cannot exceed 20% of the proposed investment, 10% of investable funds, or the uncommitted drawdown balance (whichever is lower); borrowing costs are charged only to the defaulting investor; and a 30-day cooling-off period applies between two borrowing episodes.

Q: What is the co-investment limit for investors in CIV schemes?
A: An investor’s co-investment in an investee company through CIV schemes cannot exceed three times the contribution made by that investor in the main AIF scheme’s investment in the same investee company. This cap does not apply to multilateral/bilateral development finance institutions, state industrial development corporations, and government-owned entities (Regulation 17A, AIF Regulations; para 6.1.4 of the Master Circular).

Q: Are angel funds still a sub-category under Category I Venture Capital Funds?
A: No. Post the September 2025 amendments, all existing angel funds are reclassified as Category I AIF, Angel Funds, a standalone classification, instead of being a sub-category under Category I AIF, Venture Capital Funds (para 8.9 of the Master Circular).

Q: What happens if the AIF cannot arrange a 25% bid before the dissolution period?
A: The AIF can still enter dissolution period, provided it obtains 75% investor consent by value. However, all unliquidated investments are marked at ₹1 (one rupee) for track record and performance benchmarking purposes, not at indicative or book value. This has a permanent negative impact on the manager’s reported performance record.

Q: What are the minimum investment thresholds for Special Situation Funds?
A: Each scheme of an SSF must have a minimum corpus of ₹100 crore. Minimum investment per investor is ₹10 crore (or ₹5 crore for an accredited investor). For employees or directors of the SSF or its manager, the minimum is ₹25 lakh (Regulation 19B, AIF Regulations; Chapter 9 of the Master Circular).

Q: How are investments valued when entering the dissolution period?
A: At entry into dissolution period, unliquidated investments are valued at bid value if the manager has arranged a minimum 25% bid, or at ₹1 if no such bid was arranged. During the dissolution period, the performance of the manager is tracked separately by performance benchmarking agencies, distinct from the fund’s pre-dissolution track record (para 23.1.7 to 23.1.8 of the Master Circular).

Q: What is the overseas investment limit for AIFs?
A: The combined overseas investment limit for AIFs (and erstwhile VCFs registered under the 1996 VCF Regulations) is USD 1,500 million, allocated on a first-come-first-served basis by SEBI. Investments must be in equity and equity-linked instruments of offshore venture capital undertakings (unlisted foreign companies). No more than 25% of investable funds of any scheme can be deployed overseas. The allocation is valid for four months from SEBI approval (para 5.1 to 5.2 of the Master Circular).

Q: Are there any changes to the borrowing limits for Category III AIFs?
A: Category III AIFs may not borrow for investments. The 2x NAV leverage cap for Category III AIFs is unchanged. The update in the June 2026 circular is a cross-reference to the SEBI Mutual Fund Master Circular (March 20, 2026) for treatment of offsetting positions in leverage calculation (para 7.2.8). Category I and II AIF borrowing flexibility for drawdown shortfalls was introduced through the August 2024 circular and is now codified in Chapter 14.

Regulatory references:

• SEBI (Alternative Investment Funds) Regulations, 2012: Regulations 4, 7, 10, 12, 13, 15, 16, 17, 17A, 19, 19B, 19D-19G, 20, 23, 28, 29, 29A, 29B, 19AF, 19V
• SEBI Act, 1992: Section 11(1), Section 11(2)(ib)
• SEBI (Certification of Associated Persons in the Securities Markets) Regulations, 2007: Regulation 3
• Gazette Notification No. SEBI/LAD-NRO/GN/2025/249 dated 25 June 2025
• Foreign Exchange Management (Overseas Investment) Rules and Regulations, 2022
• RBI Master Direction on Foreign Investments in India dated 04 January 2018
• RBI Master Direction: Reserve Bank of India (Credit Derivatives) Directions, 2022 dated 10 February 2022
• RBI Directions for Transfer and Distribution of Credit Risk (Commercial Banks, NBFCs, AIFIs, Small Finance Banks), 2025
• Prevention of Money Laundering (Maintenance of Records) Rules, 2005: Rule 9(3)
• SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015: Regulation 2(1)(zb)
• SEBI (AIF) Second Amendment Regulations, 2024, notified 25 April 2024
• SEBI (AIF) Amendment Regulations, 2025, notified 09 September 2025

External sources:

• SEBI: Master Circular for Alternative Investment Funds (June 2026)
• SEBI Intermediary Portal
• Reserve Bank of India
• IFSCA