Economy & BankingArticle 18 of 18

SEBI eases winding-up norms for AIFs with new 'inoperative fund' framework

Tuesday, 16 June 2026· 5 min read·Source: The Economic Times

The Securities and Exchange Board of India (SEBI) introduced a new framework allowing Alternative Investment Funds (AIFs) to retain liquidation proceeds beyond their fund life under specified conditions, and created an 'inoperative fund' framework, in changes announced around June 16, 2026. The move addresses practical difficulties during the winding-up of funds, letting AIFs manage pending liabilities and operational expenses more smoothly instead of being forced to distribute or exit assets prematurely. The reform is part of SEBI's broader push to ease compliance and improve the ease of doing business for pooled investment vehicles.

Key Facts & Details

8 points

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SEBI eased winding-up norms for Alternative Investment Funds (AIFs).
2
AIFs may now retain liquidation proceeds beyond fund life under conditions.
3
A new 'inoperative fund' framework was introduced.
4
The change helps AIFs manage pending liabilities and expenses during wind-up.
5
It is part of SEBI's ease-of-compliance reforms.

Deep Dive

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AIFs are privately pooled investment vehicles (venture capital, private equity, hedge funds) registered with SEBI.
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Earlier rules forced funds to wrap up assets within a fixed fund life, creating distress exits.
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The framework gives flexibility to handle illiquid or pending assets at the end of a fund's tenure.

Exam Focus

SEBI's June 2026 'inoperative fund' framework and eased winding-up norms apply to which type of investment vehicle?

Exam Relevance & Angle

SEBI's regulatory changes for AIFs are capital-markets awareness for banking PO and RBI-grade exams, testing the regulator and the type of fund affected.

Target Exams

SBI POIBPS POIBPS RRB OfficerRBI Grade BNABARD Grade ALIC AAOUPSC CSEState PCS

Background & Context

Alternative Investment Funds (AIFs) are privately pooled investment vehicles that collect funds from sophisticated investors to invest per a defined policy; in India they are regulated by SEBI under the SEBI (Alternative Investment Funds) Regulations, 2012 and are categorised into Category I (e.g. venture capital, infrastructure), Category II (e.g. private equity, debt funds) and Category III (e.g. hedge funds). Each AIF has a defined 'fund life' after which it must wind up and return capital. SEBI, established under the SEBI Act, 1992, periodically updates these rules to balance investor protection with market efficiency.