Accredited Investor: Advantages, Qualifications, and Its Importance
Accredited investor classification in India permits high-net-worth individuals to access exclusive financial instruments.
In today’s dynamic financial environment, new and innovative investment tools are constantly being introduced. With the stock market thriving and the financial services sector evolving rapidly, banks and non-banking financial institutions are rolling out a wide variety of offerings to cater to individuals across various income brackets.
This industry provides the chance to invest in several asset types, including stocks, bonds, government securities, fixed deposits, mutual funds, real estate, and gold, among others. However, certain high-end financial instruments are only open to a limited pool of investors. This is where accredited investor status becomes significant.
It is a distinct category for individuals with substantial income or net worth, giving them access to sophisticated products with fewer restrictions and greater flexibility.
Here’s what it means and why it’s important:
Who Qualifies as an Accredited Investor?
To qualify as an accredited investor in India, you need to meet any of the following criteria laid out by the Securities and Exchange Board of India (SEBI):
– Have an annual income of ₹2 crore or more.
– Or possess a net worth of ₹7.5 crore, with at least ₹3.75 crore in financial assets.
– Or earn ₹1 crore annually and maintain a net worth of ₹5 crore, with ₹2.5 crore in financial assets.
Why It’s Important
- Lower Investment Threshold
Typically, investments in premium services such as Portfolio Management Services (PMS) or Alternative Investment Funds (AIFs) require large sums—₹50 lakh to ₹1 crore. But accredited investors can enter with just ₹10–25 lakh, based on the product. This lowers the entry barrier and allows for more diverse asset allocation while maintaining liquidity.
- Access to Exclusive Investment Opportunities
Accredited investors can put money into options that are unavailable to general investors—like private equity, venture capital, Special Situation Funds, or pre-IPO shares. Some of these are available with reduced investment sizes, particularly in GIFT City, India’s international financial services centre.
- Tailored Services and Greater Autonomy
Accredited investors often receive personalised financial services. They may enjoy more flexible investment plans, lower fees (or performance-linked fees), and advisory services not typically extended to standard investors. They also have more influence over how their investments are handled.
Why It’s Rarely Used
Despite the advantages, very few individuals in India have opted for this route. According to an Economic Times report, India has around 650 accredited investors, in contrast to over 24 million in the United States.
For those who meet the eligibility, becoming an accredited investor can unlock access to premium financial products, require lower investment amounts, and offer exclusive opportunities and custom services. It’s a smart step for individuals aiming to grow their wealth strategically.
