Amendments 2026

Definition of "associate" restructured: replaces the earlier company/LLP/body-corporate-based test with a person-based test (any person, individually or collectively, holding 20% or more of paid-up equity/partnership interest/equivalent economic interest), and carves out a fiduciary appointed under Reg 17(2) from being deemed an "associate" unless that person holds a direct economic interest or control in the FME. "Person" now takes the meaning given in the IFSCA AML/CFT/KYC Guidelines, 2022.

"Certificates of deposit" removed from the illustrative list of permissible short-term instruments in the first proviso to Reg 22(1) (Venture Capital permissible investments).

New second proviso: any money received from contributors before the first close of a VC scheme can only be deployed in Reg 22(1)-permissible investments that preserve capital and maintain adequate liquidity — e.g. bank deposits with premature-withdrawal options, overnight funds — as disclosed by the FME in the placement memorandum.

A Venture Capital scheme may make follow-on investments in an investee company more than 10 years after its incorporation in subsequent funding rounds, subject to three conditions: (i) consistency with the scheme's investment objectives/strategy, PM and internal FME policies; (ii) an investor excluded from a company (by choice or FME decision) cannot participate in later rounds for that company; and (iii) the scheme's post-issue beneficial interest (fully diluted) in that company cannot exceed its pre-issue beneficial interest.

FME must ensure any differential distribution rights created via senior and junior/subordinate units in a Venture Capital scheme follow the framework to be specified by the Authority. Definitions of "senior units" and "junior/subordinate units" (including mezzanine units) inserted.

NAV disclosure to VC scheme investors: at least yearly, starting from the FY in which the scheme commences investment activities (excluding Reg 22(1) second-proviso pre-first-close investments), within the PM-disclosed timeline. Portfolio disclosure: at least yearly on the same starting-point basis, within 1 month of each FY end.

Reg 26(2) valuation-norms wording amended to clarify the norms are "for the purpose of computation and disclosure of NAV to the investors and in line with" the specified valuation norms (Sixth Schedule).

Valuation-norms exemption widened: applies to investments made by a scheme in other scheme(s) regulated by a financial sector regulator (directly or through a manager) in IFSC, India or a foreign jurisdiction, and valued by an independent entity — dropping the earlier narrower conditions.

NAV computation frequency for VC schemes (at least annual) now explicitly starts from the FY in which the scheme commences investment activities, excluding Reg 22(1) second-proviso pre-first-close investments.

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.

Cross-reference "detailed under Chapter II" replaced with "specified under these regulations" (Reg 28(3) — manner of computing FME contribution/withdrawal restriction cross-reference).

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.

If an FME fails to reach the Reg 35(2) minimum corpus size within the specified timeline, it may extend the placement memorandum's validity in six-month increments (applied for while the PM is still valid), subject to a fee: 25% of the fresh-scheme filing fee for the first extension, 50% for each subsequent extension.

"Certificates of deposit" removed from the permissible short-term instruments proviso for Restricted schemes (mirrors item 3 for VC).

Pre-first-close (close-ended) / pre-USD-1-million-raised (open-ended) monies from Restricted scheme contributors must be deployed only in Reg 34(1) permissible, capital-preserving, liquid investments (bank deposits with premature withdrawal, overnight funds, etc.) as disclosed in the placement memorandum.

Senior/junior (subordinate) unit differential distribution rights in a Restricted scheme must follow the Authority-specified framework, with the same senior/junior unit definitions as inserted for VC schemes.

NAV disclosure to Restricted scheme investors: at least monthly (open-ended) or half-yearly (close-ended), from the month/half-year the scheme commences investment activities (excluding Reg 34(1) second-proviso investments), within the PM-disclosed timeline. The half-yearly period can be extended to one year with prior approval of at least 75% of investors by value. Portfolio disclosure: at least quarterly from the commencement quarter, within 1 month of each quarter-end.

Same wording clarification as item 8, applied to Restricted scheme valuation norms.

Same broadened valuation-exemption proviso as item 9, applied to Restricted schemes.

NAV computation for Restricted schemes: at least monthly generally (from the month investment activities commence, excluding Reg 34(1) second-proviso investments); at least half-yearly for close-ended schemes; at least yearly for close-ended schemes where the FME has obtained prior investor approval under the new Reg 36(3) proviso (the 75% consent route).

Restricted scheme FME/associate contribution restructured: close-ended schemes — at least 2.5% of corpus or USD 750,000, whichever is lower; open-ended schemes — at least 5% of corpus or USD 1,500,000, whichever is lower; in both cases capped at 10% of corpus. Not mandatory for schemes relocating to IFSC from outside India. The 10% ceiling doesn't apply under the same resident/non-resident, one-third/25%-of-corpus conditions as the amended Reg 28(1).

Same "detailed under Chapter II" to "specified under these regulations" cross-reference fix as item 12, applied to Reg 40.

Fund-of-funds exemption from mandatory contribution restated (as in item 13); two new exemption categories added — (d) the scheme is an index scheme, and (e) the scheme is a fund-of-funds investing in index schemes or passive ETFs, with inter-se allocation disclosed in the PM.

"Certificates of deposit" removed from the Retail scheme permissible short-term instruments proviso (mirrors items 3 and 15).

Pre-minimum-size (Reg 47(6), close-ended) / pre-USD-1-million (open-ended) monies from Retail scheme contributors must be deployed only in Reg 46(1) permissible, capital-preserving, liquid investments as disclosed in the offer document.

Sectoral-cap limit under Reg 47 does not apply to a fund-of-funds Retail scheme investing in other scheme(s) regulated by the concerned regulator in their home jurisdiction and permitted there to offer to retail investors.

Offer document mandatory disclosures for Retail schemes now must also include the "methodology of computation and disclosure of NAV".

Offer document mandatory disclosures for Retail schemes now must also include "conflicts of interest" (inserted between fees/expenses and risk management practices).

NAV disclosure for Retail schemes: daily (open-ended) or at least weekly (close-ended), from commencement of investment activities (excluding Reg 46(1) second-proviso investments), in the manner specified by the Authority. Portfolio disclosure: at least quarterly from the commencement quarter, within 1 month of quarter-end.

Same wording clarification as items 8/19, applied to Retail scheme valuation norms.

Same broadened valuation-exemption proviso as items 9/20, applied to Retail schemes.

NAV computation for Retail schemes: daily (open-ended) or weekly (close-ended), from the day/week investment activities commence, excluding Reg 46(1) second-proviso investments, in the Authority-specified manner.

FME/associate contribution not mandatory for Retail schemes in four cases: (i) schemes relocated to IFSC from outside India; (ii) fund-of-funds with similar requirements, no active IFSC management, inter-se allocation disclosed in offer document; (iii) index schemes; (iv) fund-of-funds investing only in index schemes/passive ETFs with inter-se allocation disclosed.

Same "detailed under Chapter II" to "specified under these regulations" fix as items 12/23, applied to Reg 52.

The USD 3 billion AUM threshold that triggers ESG-related obligations under Reg 72(1) now expressly excludes the AUM of fund-of-funds schemes.

Advisory-services eligibility condition updated to reference compliance with Regulation 34 of the IFSCA (Capital Market Intermediaries) Regulations, 2025 (replacing the prior 2021 regulations reference).

Reference to "IFSCA (Capital Market Intermediaries) Regulations, 2021" replaced with "...Regulations, 2025" throughout clause (b).

Explanation II to Reg 104(5) now adds that action taken in pursuance of Reg 30 shall accordingly be taken on record by the Authority.

New recordkeeping category added: records pertaining to internal policies, frameworks, plans or standard operating procedures prepared by the FME in compliance with these regulations.

Scheme Annual Report filing timeline extended from "four" months to "six (6)" months after financial year end.

Timeline for providing the Scheme Annual Report / abridged summary to investors also extended from "four" to "six (6)" months after financial year end.

The FME contribution/audit-related requirement under Reg 135(1) does not apply to FMEs set up by Government/Government-related investors (central banks, sovereign wealth funds, international/multilateral organisations or agencies, or entities at least 75% owned/controlled by such investors), where such investors are the sole (direct or indirect) contributors to the FME's schemes.

All policies, frameworks, plans or schemes (by whatever name called) prepared to comply with the regulations must be approved by the FME's Board of Directors/designated partners/trustees (as applicable), or an authorised committee, or a designated senior management official to whom such powers have been delegated.

Sub-items (c) "appointed auditors to audit its accounts" and (e) "appointed fund administrators registered with the Authority or in-house capability" removed from the pre-scheme-launch fiduciary checklist in item (a)(ix), and relocated (see item 49) to a new pre-investor-agreement checklist item (ixa).

Before executing an agreement with any investor in a scheme, fiduciaries must ensure the FME has: (a) appointed auditors; (b) appointed a fund administrator registered with the Authority, or satisfied itself the FME has in-house capability; (c) appointed an independent valuer for the scheme's portfolio; and (d) appointed a custodian for the scheme, if applicable under Reg 132.

Cross-reference "provided in Second Schedule" replaced with "specified under these regulations".

Fiduciaries must ensure that wherever required under Regs 23(2), 23(4), 35(3), 35(4) and 36(3), the FME either obtains investor approval or makes adequate and prominent disclosure in the placement memorandum, and also includes it in the investor agreement.