These changes, officially published in the Gazette of India, focus on extending fund life and tightening borrowing restrictions for AIFs.

One of the major amendments allows accredited investors to extend the lifespan of an AIF by up to five years. This extension is subject to the approval of two-thirds of the fund's investors, providing an opportunity to maximize returns by prolonging the fund’s operation when advantageous.

SEBI has also reinforced its position on borrowing by AIFs, generally prohibiting these funds from borrowing or taking on leverage, either directly or indirectly. However, specific exceptions have been introduced under the new regulations. AIFs are now permitted to borrow short-term funds for up to 30 days, but only four times a year, with the total borrowed amount capped at 10% of the fund’s investable corpus. The provision also allows AIFs to create encumbrance on the equity of companies they invest in, if the primary business of those companies involves the development, operation, or management of projects within infrastructure sub-sectors recognised by the central government. The AIFs can create such encumbrance only when the investee company is borrowing funds.

All borrowing activities must adhere to SEBI's strict conditions to ensure that the financial stability of the funds and the broader financial system is not compromised.

These amendments, as published in the Gazette of India, are expected to provide more operational flexibility for AIFs, particularly benefiting accredited investors, while reinforcing SEBI's commitment to a robust regulatory framework.

For more details, please refer to the official publication in the Gazette of India click here.