IFSCA (Fund Management) Regulations, 2025Amended in 2026Chapter III · Schemes for Fund Management
Chapter III · Schemes for Fund Management
Regulation 28 – Contribution by the FME in the scheme
Amended 2026 Critical importance about 3 min
Venture Capital schemes: Structure, eligible investors, permissible investments and the FME's own contribution for VC schemes.
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In plain English
The FME (or its ) must put its own capital at risk in every VC — as amended, at least 2.5% of or USD 750,000 (whichever is lower), capped at 10% of corpus, with relaxed ceilings for defined non-resident/resident structures.
In plain English
≥2.5% of corpus or USD 750,000 (lower), capped at 10%
VC scheme — FME contribution
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The rule, in its own words
Read the exact text of Regulation 28
28. (1) 13[Under a Venture Capital scheme, the FME or its associate shall contribute an amount which shall be at least 2.5% of the corpus or USD 750,000, whichever is lower, subject to such contribution not exceeding 10% of the corpus: Provided that the contribution by the FME or its associate shall not be mandatory in case of relocated schemes established or incorporated or registered outside India to IFSC. Provided further that the ceiling of 10% shall not apply to a Venture Capital scheme if: (i) the FME and its associate investing in the scheme, are persons resident outside India and do not have any person resident in India as their ultimate beneficial owners and not more than one-third …
Show the full text
28. (1) 13[Under a Venture Capital scheme, the FME or its associate shall contribute an amount which shall be at least 2.5% of the corpus or USD 750,000, whichever is lower, subject to such contribution not exceeding 10% of the corpus: Provided that the contribution by the FME or its associate shall not be mandatory in case of relocated schemes established or incorporated or registered outside India to IFSC. Provided further that the ceiling of 10% shall not apply to a Venture Capital scheme if: (i) the FME and its associate investing in the scheme, are persons resident outside India and do not have any person resident in India as their ultimate beneficial owners and not more than one-third of the corpus of the scheme is invested in an Investee Company and its associates, or (ii) the FME and its associate investing in the scheme, are persons resident in India or have any person resident in India as their ultimate beneficial owner, the investments under the scheme are made only in permissible investments, as per sub-regulation (1) of regulation 22, in IFSC or foreign jurisdictions and the said contribution does not exceed 25% of the corpus of the scheme.] (2) The said contribution in proportion to investment by the investor(s) in the scheme shall be made by the FME or its associate within forty-five (45) days and be maintained on an ongoing basis: Provided that the period of forty-five (45) days may be extended, subject to the satisfaction of the Authority. (3) The contribution, if brought in by FME, may be taken into consideration for the purpose of net-worth requirements as 14[specified under these regulations]. (4) The said contribution shall be exempted if: (a) at least two-thirds (2/3rd) of the investors in the scheme by value permit waiver of such contribution; (b) at least two-thirds (2/3rd) of the investors in the scheme are accredited investors; or (c) 15[The scheme is a fund of funds scheme investing in scheme(s) with similar requirements, wherein the scheme in IFSC does not involve active management by the FME and the details of inter-se allocation of the underlying scheme(s) are disclosed in the placement memorandum of the scheme.]
Statutory text — Principal Regulations, 2025, consolidated as amended up to 10 September 2026 (including the Second Amendment, 2026). The notified Gazette text prevails. Tap a highlighted word for how it functions.
Amendment history (2 notes)
Footnotes from the consolidated text. They record earlier wording and are not operative law.
13 Substituted by the International Financial Services Centres Authority (Fund Management) (Second Amendment) Regulations, 2026, w.e.f. September 10, 2026. Prior to the substitution, it read as- “Under a Venture Capital scheme, the FME or its associate shall invest:- a) at least 2.5% of the targeted corpus and not exceeding 10% of the targeted corpus in a scheme with targeted corpus up to USD 30 Million; b) at least USD 750,000 and not exceeding 10% of the targeted corpus in a scheme with targeted corpus more than USD 30 Million: Provided that the contribution by the FME or its associate shall not be mandatory in case of relocated schemes established or incorporated or registered outside India to IFSC. Provided further that the ceiling of 10% shall not apply for Venture Capital schemes if: (i) the FME and its associate investing in the scheme, are persons resident outside India and do not have any person resident in India as their ultimate beneficial owners; and (ii) not more than one-third of the corpus of the scheme is invested in an Investee Company and its associates.”
14 Substituted by the International Financial Services Centres Authority (Fund Management) (Second Amendment) Regulations, 2026, w.e.f. September 10, 2026. Prior to the substitution, it read as “detailed under the Chapter II”.
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Exceptions and conditions
Taken from the wording of this provision — the carve-outs and conditions worth reading closely.
(1) 13[Under a Venture Capital scheme, the FME or its associate shall contribute an amount which shall be at least 2.5% of the corpus or USD 750,000, whichever is lower, subject to such contribution not exceeding 10% of the corpus: Provided that the contribution by the FME or its associate shall not be mandatory in case of relocated schemes established or incorporated or registered outside India to IFSC
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What this means in practice
Compliance actions
Applies to
Venture Capital scheme
Frequency
At scheme launch; monitored through scheme life
Trigger
Scheme corpus finalisation
Evidence
Contribution computation workpaper; Residency/UBO assessment for ceiling carve-out
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What changed in 2026
Earlier
(1) Under a Venture Capital scheme, the FME or its associate shall invest:- (a) at least 2.5% of the targeted corpus and not exceeding 10% of the targeted corpus in a scheme with targeted corpus up to USD 30 Million; (b) at least USD 750,000 and not exceeding 10% of the targeted corpus in a scheme with targeted corpus more than USD 30 Million...
Now
(1) Under a Venture Capital scheme, the FME or its associate shall contribute an amount which shall be at least 2.5% of the corpus or USD 750,000, whichever is lower, subject to such contribution not exceeding 10% of the corpus: Provided that the contribution by the FME or its associate shall not be mandatory in case of relocated schemes established or incorporated or registered outside India to IFSC: Provided further that the ceiling of 10% shall not apply to a Venture Capital scheme if: (i) the FME and its associate investing in the scheme, are persons resident outside India and do not have any person resident in India as their ultimate beneficial owners and not more than one-third of the corpus of the scheme is invested in an Investee Company and its associates, or (ii) the FME and its associate investing in the scheme, are persons resident in India or have any person resident in India as their ultimate beneficial owner, the investments under the scheme are made only in permissible investments, as per sub-regulation (1) of regulation 22, in IFSC or foreign jurisdictions and the said contribution does not exceed 25% of the corpus of the scheme.
(1) Under a Venture Capital scheme, the FME or its associate shall invest:-contribute (a)an amount which shall be at least 2.5% of the targetedcorpus andor USD 750,000, whichever is lower, subject to such contribution not exceeding 10% of the targetedcorpus: corpusProvided that the contribution by the FME or its associate shall not be mandatory in case of relocated schemes established or incorporated or registered outside India to IFSC: Provided further that the ceiling of 10% shall not apply to a Venture Capital scheme withif: targeted(i) corpusthe upFME toand USDits 30associate Million;investing (b)in atthe leastscheme, USDare 750,000persons resident outside India and do not exceedinghave 10%any person resident in India as their ultimate beneficial owners and not more than one-third of the targetedcorpus of the scheme is invested in aan Investee Company and its associates, or (ii) the FME and its associate investing in the scheme, are persons resident in India or have any person resident in India as their ultimate beneficial owner, the investments under the scheme withare targetedmade corpusonly morein thanpermissible USDinvestments, 30as Million...per sub-regulation (1) of regulation 22, in IFSC or foreign jurisdictions and the said contribution does not exceed 25% of the corpus of the scheme.
VC scheme FME/associate contribution restructured to a flat test: at least 2.5% of the corpus OR USD 750,000, whichever is lower, subject to the contribution not exceeding 10% of the corpus (replacing the earlier two-tier targeted-corpus test based on a USD 30 million threshold). Contribution not mandatory for schemes relocating to IFSC from outside India. The 10% ceiling does not apply if: (i) FME and associate are persons resident outside India with no Indian-resident ultimate beneficial owner and not more than one-third of corpus invested in one investee company and its associates, or (ii) FME/associate are (or have an Indian-resident UBO) and investments are made only in Reg 22(1) permissible investments in IFSC/foreign jurisdictions with contribution not exceeding 25% of corpus.
Practical effect
Direct change to the mandatory FME skin-in-the-game formula for every Venture Capital scheme — replaces the targeted-corpus/USD-30-million tiering with a simpler corpus-linked minimum, and rewrites the resident/non-resident carve-outs from the 10% ceiling.
What to do
Recompute FME/associate contribution for all live and pipeline VC schemes under the new formula; re-test residency/UBO status against the revised 25%/one-third conditions.
Cross-reference "detailed under Chapter II" replaced with "specified under these regulations" (Reg 28(3) — manner of computing FME contribution/withdrawal restriction cross-reference).
Practical effect
Broadens the cross-reference from Chapter II specifically to the regulations generally; unlikely to be substantive but removes a chapter-specific pointer that no longer matches the current structure.
What to do
Update internal citation trails referencing Chapter II for this purpose.
Fund-of-funds exemption from mandatory FME contribution restated: applies where the VC scheme invests in scheme(s) with similar requirements, the IFSC scheme is not actively managed by the FME, and inter-se allocation among underlying schemes is disclosed in the placement memorandum.
Practical effect
Clarificatory restatement of the existing fund-of-funds contribution exemption.
What to do
Confirm placement memoranda for VC fund-of-funds schemes disclose inter-se allocation as worded.
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The numbers that matter
Requirement
Threshold
On crossing
VC scheme — FME contribution
≥2.5% of corpus or USD 750,000 (lower), capped at 10%
Mandatory skin-in-the-game unless an exemption applies
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Where it connects
Refers to / depends on
Read alongside
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Check yourself
Quiz Centre
Test yourself on Regulation 28
24 questions in the unified bank test this regulation. Each explains every option and cites the provision.
Under the Second Amendment, what is the FME/associate contribution formula for a Venture Capital scheme?
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Your notes
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