SEBI Proposes Revamp to Expand Accredited Investor Pool to 4 Lakh for AIFs

The Securities and Exchange Board of India (SEBI) has released a consultation paper proposing a wide-ranging overhaul of the Accredited Investor (AI) framework. The move is designed to dismantle bureaucratic hurdles and significantly expand access to high-risk, high-return private market instruments such as Alternative Investment Funds (AIFs), Portfolio Management Services (PMS), and Angel Funds.

According to SEBI, introducing a new eligibility criterion based on dematerialised securities market holdings could expand the pool of eligible accredited investors to approximately 4 lakh. In comparison, India’s current active AIF investor base stands at approximately 1 lakh (around 96,000 investors), while barely 3,820 individuals held formal accreditation certificates as of mid-2026 due to onerous certification procedures.

The proposed reforms stem from market feedback and recommendations submitted by SEBI’s Alternative Investment Policy Advisory Committee (AIPAC).

New Securities-Asset Eligibility Route

Under the existing framework established in 2021, individuals, Hindu Undivided Families (HUFs), family trusts, and sole proprietorships must satisfy rigid income or net-worth thresholds to earn accreditation. Current criteria require an annual income of at least ₹2 crore, a net worth of at least ₹7.5 crore (with 50% in financial assets), or an annual income of ₹1 crore coupled with a ₹5 crore net worth.

SEBI has now proposed an additional, verifiable pathway based strictly on dematerialised market wealth:

• Individual Investors: Must hold at least ₹5 crore in securities market assets.
• Body Corporates: Must maintain at least ₹20 crore in securities market assets.

Eligible securities include listed equities, debt instruments, units of Real Estate Investment Trusts (REITs), Infrastructure Investment Trusts (InvITs), AIF units, mutual fund holdings, open futures positions, and unlisted securities held in demat form. SEBI noted that portfolio holdings verify an investor’s financial capability and signal familiarity with financial market volatility and risk.

Simplifying the Onboarding Architecture

Currently, investors must seek third-party verification through designated Accreditation Agencies, a process criticized by domestic wealth managers for being cumbersome and short-lived. SEBI is introducing operational relaxations to eliminate friction:

• Manager-Led Accreditation: Fund managers and intermediaries will be permitted to verify and accredit investors directly during onboarding, with accreditation valid across the intermediary's corporate group.
• Longer Certificate Validity: The validity period of accredited investor status is proposed to be extended to a uniform three years based on the latest verified documentation, replacing the current one- to two-year renewal cycles.
• Paperless Verification: Asset verification can be completed digitally via consolidated account statements (CAS), depository records, or brokerage statements, reducing reliance on physical chartered accountant certificates.

Fast-Tracking Non-Resident Capital

In an effort to unlock foreign capital inflows, the regulator has proposed conferring "deemed accredited investor" status to all Persons Resident Outside India (PROI) under the Foreign Exchange Management Act (FEMA), including Non-Resident Indians (NRIs), Overseas Citizens of India (OCIs), and registered Foreign Portfolio Investors (FPIs).

Under current rules, standard domestic investors must commit at least ₹1 crore to enter an AIF. Accredited investors, by contrast, are exempt from this statutory minimum ticket size, allowing flexible allocations to specialized venture capital, private equity, private credit, and special situation funds. Expanding deemed accreditation to PROIs removes onboarding bottlenecks and provides seamless access to India-focused risk capital strategies without mandatory investment floors.

Tags: SEBI Alternative Investment Funds Portfolio Management Services Wealth Management Private Equity Foreign Exchange Management Act