FME contribution after September 2026: the 'whichever is lower' rule, with worked examples

Since the Second Amendment, the FME's own contribution to a scheme (with its associates) is the lower of a percentage of corpus and a fixed dollar amount. The result is simpler than the old bands, and it caps the contribution for large schemes.

The formulas

VC schemes and close-ended restricted schemes (and SSFs): lower of 2.5% of corpus or USD 750,000 (Regulations 28(1), 40(1)(a), 60).
Open-ended restricted schemes: lower of 5% of corpus or USD 1.5 million (Regulation 40(1)(b)).
Retail schemes: lower of 1% of AUM or USD 200,000 (Regulation 52(1)).

Worked examples

A VC scheme with a USD 10 million corpus: 2.5% is USD 250,000, which is lower than USD 750,000, so USD 250,000. At USD 30 million, both figures are USD 750,000. At USD 45 million, 2.5% would be USD 1.125 million, so the cap of USD 750,000 applies.

An open-ended Category III scheme with a USD 10 million corpus: 5% is USD 500,000. At USD 30 million, both figures meet at USD 1.5 million. A retail scheme with USD 15 million of AUM: 1% is USD 150,000; at USD 25 million, the USD 200,000 cap applies.

The 10% ceiling

Contribution cannot exceed 10% of corpus, except in two cases for VC and restricted schemes. First, a non-resident FME with no Indian-resident ultimate beneficial owner, whose scheme invests no more than one-third of corpus in one investee and its associates, has no 10% ceiling. Second, an India-resident FME whose scheme invests only in IFSC or foreign jurisdictions may contribute up to 25%.

Timing

The contribution is not a one-time payment. It must be made proportionately, within 45 days of each investor drawdown, and maintained for the scheme's life (Regulations 28(2), 40(2)). A drawdown register that matches each investor call with the FME's contribution is the simplest evidence.

Exemptions

For VC and restricted schemes, contribution can be waived where at least two-thirds of investors by value agree, or where at least two-thirds of the investors are accredited investors. Relocated schemes are exempt. Funds of funds are exempt only if the underlying schemes carry similar requirements, the FME does no active management and the allocation is disclosed. From September 2026, index schemes and funds of funds investing in passive ETFs are also exempt. Retail schemes do not have the investor waiver.

The FME's contribution counts towards its net worth requirement. Try the contribution calculator for your corpus.