MC EXCLUSIVE IFSCA faces industry pitch to ease $150,000 entry cap for GIFT City AIFs, but holds firm for now

IFSCA faces industry pitch to ease $150,000 entry cap for GIFT City AIFs, but holds firm for now

A proposal to make GIFT City-based fund structures more accessible to smaller investors might have been quietly put on hold, multiple people aware of the matter told Moneycontrol.

The International Financial Services Centres Authority (IFSCA) had earlier heard requests to reduce the minimum investment threshold for AIFs from the current USD 150,000 (about Rs 1.25 crore) per investor. This was also in an attempt to look for more retail-friendly structures, following what mutual funds are already exploring (eg. DSP's global equity fund has a lower limit of USD 5,000 for it's restricted scheme at GIFT City).

The discussion, sources said, was aimed at improving ease of participation and broadening the investor base within GIFT City’s fast-evolving funds ecosystem, especially with the significant growth observed in the alternative investment space.

However, the plan seems to have been deferred. According to a source familiar with the deliberations, the hesitation stems from the regulatory trade-off that comes with allowing smaller, quasi-retail investments into what is designed to be a global, institutional platform.

“If you allow retail participation, you also have to make the regulations very tight, similar to how SEBI regulates mutual funds. At present, those restrictions don’t apply in GIFT City,” explained another executive.

Sources added that IFSCA may be wary of blurring the boundary between mutual funds and AIFs, which are meant to cater to distinct investor bases. Allowing smaller-ticket investors would require tighter exposure, concentration, and liquidity norms, potentially undermining the very flexibility that attracted fund managers to GIFT City in the first place.

“It’s a question of balance,” said one person. “The moment you go too retail, you lose the flexibility that defines the GIFT City advantage.”

While internal discussions were taking place through September, the proposal is understood to have been pushed back indefinitely, with the regulator now reviewing the issue in a broader context. The debate, sources said, has shifted from a simple threshold tweak to a larger policy conversation around investor eligibility, product design, and regulatory overlap.

Adding to that dynamic, SEBI’s recent approval for domestic mutual funds to launch international feeder funds within GIFT City has already created a regulated retail-accessible route. “That may have reduced the urgency to open up AIFs further for small-ticket investors,” said another industry participant.

Fund managers have periodically sought easier access norms in GIFT City, much like similar appeals in India’s AIF ecosystem, but the regulator remains wary of diluting standards designed to preserve jurisdictional clarity.

Legal experts say any proposal to reduce the USD 150,000 entry limit for restricted AIFs would clash with SEBI’s domestic AIF framework, which enforces a Rs 1 crore minimum and permits smaller investors only through the accredited investor route. That would require a fundamental rewrite of the base rules that define what constitutes an AIF, both within India and at GIFT.”

For now, the minimum investment for GIFT City AIFs remains USD 150,000 per investor.

Several mutual fund houses, including DSP, Nippon, HDFC AMC, and Mirae Asset, have secured licences to operate in the jurisdiction. After DSP, PPFAS and NJ are next in line to launch schemes from GIFT City, sources had told Moneycontrol earlier in September.

Note: An official response was yet to be received from IFSCA at the time of writing this article.