The markets regulator is drawing sharper lines on who can fund startups while cutting red tape for foreign investors in sovereign debt. On Wednesday, Sebi rolled out two key changes: angel funds under the Alternative Investment Fund (AIF) regime can now raise capital only from accredited investors, while foreign portfolio investors (FPIs) putting money solely in government securities under the fully accessible route will face lighter compliance. The twin moves reflect Sebi’s effort to streamline fundraising at home and attract stable overseas capital to India’s bond market.

Angel Funds Under the Scanner

• Only accredited investors can participate in angel funds.
• Existing funds have until September 8, 2026 to align.
• During transition, they cannot onboard more than 200 non-accredited investors.
• Current investors may retain holdings as per their PPM.

FPI Compliance Relief

• FPIs investing only in government securities via the fully accessible route need not submit investor group details.
• They are exempt from select disclosure and reporting rules.
• Designed to make India’s sovereign debt market more attractive for long-term global investors.

Why It Matters

• For startups: The accredited investor filter could reduce the pool of small-ticket investors but improve fund quality.
• For debt markets: Easier rules for FPIs may boost inflows into government bonds, strengthening India’s market depth.
• For Sebi: These reforms balance tighter checks in high-risk areas with lighter touch in stable segments.

The Bigger Picture
India’s capital markets are maturing fast. By tightening angel funding norms, Sebi seeks to professionalize early-stage investing, reducing compliance risk. Simultaneously, the FPI relief aligns with India’s ambitions of deeper inclusion in global bond indices, potentially unlocking billions in passive inflows.