Capital markets regulator Sebi on Friday reduced the validity period of approval given to alternative investment funds (AIFs) and venture capital funds (VCFs) for making overseas investments to four months from six months at present.

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If these funds fail to make investments within this time limit, then Sebi can allocate their unutilized limits to other applicant AIFs and VCs.

The decision has been taken considering into account the recommendation of the Alternative Investments Policy Advisory Committee, the Securities and Exchange Board of India (Sebi) said in a circular.

Under the rule, AIFs and VCFs have a time limit of six months from the date of prior approval from Sebi to making the allocated investments in offshore venture capital undertakings.

In case the applicant AIFs and VCFs does not utilize the limits allocated to them within six months then Sebi can allocate such unutilized limit to another applicant.

"It has been decided to reduce the aforesaid time limit for making overseas investments by AIFs/VCFs from six months to four months so that the allocated time limit is used efficiently and if unutilized, the same is again available to the AIF industry in a shorter span of time, " Sebi said.

The new framework will apply to the overseas investment approvals granted by Sebi following the issuance of this circular.