SEBI’s Ananth Narayan Says AIF Governance Issues Resolved, Urges India Inc. To Take Big Risks

The issues between the Alternative Investment Fund (AIF) industry and the Securities and Exchange Board of India (SEBI) that existed as recently as two years ago have now been resolved, said the regulator's Whole Time Member Ananth Narayan G at a Confederation of Indian Industry (CII) event on Tuesday.

“We did have our share of issues with sections of this industry two years ago, when we found some AIFs being structured to circumvent financial sector regulations. The good news is that stakeholders, associations such as IVCA, and SEBI have worked since then to ensure these errors are plugged,” he said.

IVCA stands for Indian Venture and Alternate Capital Association, a non-profit industry body associated with the alternate capital industry.

Calling the AIF industry a silent winner that is rapidly growing, Narayan stated that domestic AIF industry has been expanding rapidly, with total commitments reaching Rs 13 lakh crore, as of December 2024.

Talking about the larger industry concerns, Narayan mentioned that AIFs can be crucial to channel risk-aware and risk-savvy money into entrepreneurs and risk takers.

He added that SEBI must ensure the availability of risk capital while balancing regulatory oversight, while explaining how Indian industries need capital to take on global forces. He mentioned the existence of two types of errors: Type 1 Errors, such as fraud and siphoning, which can delay capital formation by years; and Type 2 Errors, where regulations inadvertently hinder capital formation.

He also urged the Indian industries to move beyond incremental progress and take greater risks. "We cannot always be the back office of the world. We need to come to the frontline," he said, calling on industry players to shape the future at a global level.

Narayan, drawing from his experience as a trader, stressed that those on the ground have the best understanding of market realities. "The responsibility starts and ends with the frontline," he remarked.