The International Financial Services Centres Authority (IFSCA), on September 25, 2026, issued a Circular prescribing the Framework for Differential Distribution in Venture Capital Schemes and Restricted Schemes under the IFSCA (Fund Management) Regulations, 2025. The framework is intended to provide flexibility to raise funds from investors with different risk appetites and facilitate blended finance and other fund structures, including by attracting concessional financing from Multilateral Development Banks and Development Financial Institutions.
The framework enables Venture Capital Schemes and Restricted Schemes to issue multiple classes of units with differential distribution rights, allowing structures where junior or subordinate classes may have returns lower than or losses higher than their proportionate entitlement. The framework also facilitates blended finance structures and follows recommendations of IFSCA's Expert Committee on Sustainable Finance, as well as representations received from industry associations and market participants regarding differentiated risk-return structures for sophisticated investors.
The Circular has been issued pursuant to the amendments to the FM Regulations and in exercise of powers under Sections 12 and 13 of the International Financial Services Centres Authority Act, 2019, read with Regulation 23(5) and Regulation 35(6) of the IFSCA (Fund Management) Regulations, 2025. The detailed Framework for Differential Distribution is annexed to the Circular.
[Circular No. F. No. IFSCA-DSF0SFHB/1/2025-Capital Markets]
