Sebi may soon ease compliance norms for PE, VC funds in India: Report

The capital markets regulator had last week sent an email to 20 fund officials asking them to suggest ways to reduce the compliance burden


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BS Web Team New Delhi

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The Securities and Exchange Board of India (Sebi) is soon expected to conduct a review of the existing compliance norms for venture capital (VC) and private equity (PE) funds and "simplify, ease and reduce" the associated cost, The Economic Times (ET) reported on Monday. Last week, The capital markets regulator sent an email to 20 fund officials asking them to suggest ways to reduce the compliance burden.

The report added that due to banks being risk-averse of late and high volatility in the primary market, the number of alternative investment funds (AIFs) in India has grown to over 1,000. AIF is the regulatory term for PE and VC funds. These 1,000 funds have invested over Rs 1.3 trillion in India in the past two years.

The experts quoted in the report said that Sebi aims to add new rules to prevent a blow-up. At the same time, it also feels the need to ease compliance as the AIFs have become a steady source of investment. 

In the last few months, the regulator has also issued several consultation papers dealing with topics like valuation, the blind pool principle, demat of AIF units, and carry forward of unliquidated investments, among other things.

The Sebi has also introduced several changes to AIF regulations in the past year. These include a code of conduct for fund directors, managers, and intermediaries; rules on the closing of funds; treating all investors at par; segregation of assets and liabilities of various schemes; confining the tenure of funds to what is stated in the fund document; and rules on disclosing and addressing investor grievances.

Recently, Sebi also explored introducing a new rule to raise the minimum investment in an AIF from Rs 1 crore to Rs 2-3 crore for non-accredited investors. The non-accredited investors have a net worth of up to Rs 25 crore. For individuals, the liquid net worth should be up to Rs 5 crore and the total annual gross up to Rs 50 lakh.

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First Published: May 29 2023 | 11:02 AM IST

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