Why India's markets have so few accredited investors

Experts say there is a need to further simplify the accreditation process for such investors

- Akshat Rohatgi

Almost three years ago, in February 2021, market regulator Sebi initiated a significant development by introducing a draft framework on the integration of accredited investors (AIs) into the Indian securities market. So far, AIs don’t make up for a significant proportion of the investor community.

AIs, also known as qualified or professional investors, represent a category of individuals well-versed in comprehending diverse financial products and understanding the associated risks and returns. These investors are deemed well-informed due to their financial capability, allowing them to engage expert managers and advisers, thus possessing the ability to absorb potential losses. Consequently, financial products with higher risk profiles are often deemed suitable for this class of investors.

In jurisdictions where such investors are acknowledged, regulatory relaxations are extended to them, given their perceived capacity to navigate the investments landscape without extensive regulatory protection. In alignment with this, Sebi had, in August 2021, unveiled a circular detailing the implementation modalities for accrediting investors through designated accreditation agencies.