What Is a Capital Call? AIF Drawdown Schedules and Cash Planning

You have signed the contribution agreement and the fund has confirmed your capital commitment of ₹1 crore. No ₹1 crore leaves your account. Weeks later an email arrives asking for ₹10 lakh by a fixed date. That email is a capital call.

A capital call is a fund manager's contractual right to demand a portion of the money an investor has promised. In India it is the everyday mechanism behind most Category I and Category II Alternative Investment Funds (AIFs): venture capital, private equity, private credit and real estate funds.

A private equity fund does not know on day one which companies it will buy or when. If it collected every rupee upfront, much of it would sit idle for years. So it collects promises instead and draws on your capital commitment only when it needs the money.

Strictly, the capital call is the manager's notice and the drawdown is your payment in response, though most documents use the terms interchangeably.

Our guide on how AIFs work in India covers units, NAV and lock-in. This article is the deep dive for someone who has just signed: what an AIF drawdown notice contains, how fast you must pay, how a drawdown schedule is paced, why early returns look negative, how to plan cash, and what happens if you cannot pay. Carried interest is a separate subject.

The commitment-and-call structure grew out of the limited partnership model of global private equity, where limited partners commit capital and the general partner calls it over an investment period of several years.

On 21 May 2012 SEBI notified the SEBI (Alternative Investment Funds) Regulations, 2012, repealing the 1996 venture capital rules and setting a ₹1 crore minimum investment. The AIF Regulations built the commitment model into their definitions: "corpus" means the total amount committed by investors by written contract, not the cash received. Indian law measures an AIF by its promises.

The rules around calls have tightened since:

• 2020: performance benchmarking built on each scheme's dated cash flows.
• November 2022: first close within 12 months; tenure runs from first close.
• June 2023: units against fresh drawdowns must be in demat form.
• August 2024: Category I and II AIFs may borrow, within tight limits, to cover an investor's unpaid call.
• November and December 2024: rights became legally pro-rata to commitment, with a carve-out for defaulters.
• September 2025: defaulters barred from co-investing in the company they failed to fund.
• November 2025: a consultation on computing pro-rata rights on total or undrawn commitment.
• June 2026: a new Master Circular for AIFs, last updated on 7 September 2026.

The day-to-day mechanics remain contractual, but the edges, especially default, are now regulated.

Every investor in a drawdown fund should be able to quote three numbers at any time:

The undrawn commitment matters most for planning. No statement shows it as money owed, yet the manager can ask for any part of it at short notice. Treat it as a liability with an unknown payment schedule. Each payment buys units; uncalled capital earns nothing inside the fund.

First close is when the fund formally accepts its initial investors and starts its tenure. SEBI's Master Circular for AIFs requires a scheme to declare it within 12 months of becoming eligible to launch, or file afresh.

More important for you: an investor may withdraw or reduce a commitment only before first close. After it, you are bound for the full amount.

Once your money is called, the fund must credit units in demat form. If you had not given demat details when units were issued, SEBI's rules park them in an Aggregate Escrow Demat Account; once you provide your details, the AIF must move them to your own demat account within five working days. This escrow holds units, not cash, and has nothing to do with the bank account named on your drawdown notice.

Not every rupee is necessarily called. One practitioner guide estimates that investors in private funds often contribute 70% to 85% of their commitments over a fund's life. Treat that as a rough guide, not a promise.

SEBI's AIF data shows how far commitments run ahead of cash. At 30 June 2026, AIFs had raised about ₹7.59 lakh crore against ₹17.53 lakh crore committed, roughly 43%, with wide variation by category:

Most Category II money, where calls are standard, is still a promise rather than cash.

A drawdown notice is short, but each line matters. Indian advisory practice expects these items; check each one:

The percentage line is the one most investors skip. Regulation 20(21) of the AIF Regulations, explained in SEBI's pro-rata and pari-passu circular, says investors' rights in each investment must be pro-rata to their commitment. If your commitment is 2% of the scheme, each call should be 2% of the total amount called, and you should own 2% of that investment.

Treat bank details with care: a drawdown notice is a high-value payment instruction sent by email, an obvious target for fraud.

SEBI does not prescribe a notice period for a capital call. Nothing in the AIF Regulations or the Master Circular fixes one; the period is set in the contribution agreement and the private placement memorandum (PPM). Indian market practice is usually 10 to 15 business days between notice and due date. Global practice is similar, with ten business days a common standard.

Ten business days goes quickly if your money sits in a fixed deposit or an account abroad, so plan each payment's source in advance.

There is no standard drawdown schedule. Fund documents describe an investment period and leave timing to the manager, but shapes vary predictably by what the fund buys:

These shapes are qualitative. We could not find published Indian data on year-by-year call pacing, so treat any specific schedule, including ours below, as illustrative. Global practitioner guides describe individual calls of roughly 10% to 25% of a commitment, over an investment period of about three to five years. Some managers call deal by deal; others quarterly. Ask yours for an indicative drawdown schedule; it will be a range, not a promise.

After the investment period, the fund usually cannot call capital for new investments, but it can still call for follow-ons, fees and expenses within the limits in its documents. So an undrawn commitment does not simply vanish at year five.

If you joined at a later close, you usually pay your share of earlier drawdowns on joining, often with an equalisation charge compensating earlier investors for the time value of money, so your first payment can be larger than a normal call.

Recallable distributions work the other way. Some fund documents let the manager recall certain distributions, such as money returned from a deal that did not complete. You may receive cash and later see a similar amount called back, so read the recall and recycling clauses carefully.

Capital calls do not change what a fund earns on each rupee. They change when the rupees go in, and timing drives the return figures you will see.

In the first years of a drawdown fund, fees and set-up costs are paid from early calls while investments are still young and usually carried near cost. Returns and cumulative cash flow are negative before exits begin. Plotted over time, the line dips and then climbs, which is why it is called the J-curve.

Here is the cash side of that curve for an illustrative ₹1 crore commitment, using the drawdown schedule from our planning section and distributions in years five to eight:

The figures are hypothetical, pre-fee and pre-tax. A negative number in years one to three is normal.

Two families of measures are used for drawdown funds. Multiples such as TVPI (total value to paid-in capital) and DPI (distributions to paid-in capital) ignore time: they divide value by the money paid in. IRR, and its dated-cash-flow cousin XIRR, is a money-weighted annual rate, so a rupee called later and returned at the same time earns a higher IRR. SEBI's benchmarking framework uses capital drawn down as AUM, and benchmark agencies such as Crisil publish pooled IRR alongside DPI and TVPI by vintage.

Take the same ₹95 lakh called and the same ₹1.60 crore returned as in the table above. Fund A calls gradually (10%, 25%, 25%, 20%, 10%, 5%). Fund B front-loads (40%, 35%, 20% in years zero to two).

These are our own illustrative, annual, pre-fee and pre-tax calculations. The last two rows assume you set aside the full ₹1 crore on day one, paid every call from that reserve and released the uncalled ₹5 lakh in year five.

Same money in and out, yet Fund A reports an IRR 2.5 points higher simply because it called later. And your own return is well below either fund's IRR, because the fund's figure ignores your reserve. A personal XIRR on all your cash flows is the honest measure.

In the US and Europe, many funds use subscription lines: bank loans secured on investors' undrawn commitments, used to pay for deals before calling capital. Because investors pay later, IRR rises. The Institutional Limited Partners Association (ILPA) illustrated this: a fund with no line had a 6.62% IRR and 1.45x TVPI; with a one-year line, 7.14% and 1.40x; with a two-year line, 7.98% and 1.35x.

Indian Category I and II AIFs work under much tighter rules. They may not borrow except for temporary funding needs of up to 30 days, on no more than four occasions a year, and up to 10% of investable funds, plus a separate capped route to cover an investor's default. In our reading, that largely rules out long-dated subscription lines here, so the IRR effect comes mainly from call pace.

The drawdown structure has real advantages for investors:

• Your money keeps working. Uncalled capital stays in your own portfolio until it is needed, rather than sitting idle inside the fund.
• Less cash drag on the fund. Because money is called close to when it is invested, the fund's returns are not diluted by uninvested cash.
• Skin in the game. The manager or sponsor of a Category I or II fund must hold a continuing interest of at least 2.5% of the corpus or ₹5 crore, whichever is lower; for Category III it is 5% or ₹10 crore.
• Protection from other people's defaults. If another investor fails to pay, any shortfall borrowing is capped and its cost is charged only to the defaulter.
• An exit before you are bound. Before first close you can still withdraw or reduce a capital commitment.

Two SEBI rules make each capital call fair between investors. Pro-rata rights, under regulation 20(21), mean every investor's rights in each investment and in its proceeds track their share of commitments. The rule has stated exceptions: it does not apply where an investor has been excused or excluded from a deal, has defaulted on that deal, or shares profit with the manager as carried interest.

Pari-passu rights, under regulation 20(22), cover everything else: all other rights of investors must be on equal terms. Differential rights for select investors must follow industry implementation standards, be disclosed in the PPM and not affect others; accredited-investor-only funds and large value funds with investor waivers can opt out. A side letter should not give another investor easier call terms at your expense.

On 7 November 2025 SEBI published a draft circular on pro-rata rights proposing that "commitment" in the pro-rata rule could mean either total or undrawn commitment, with the method fixed in the PPM for the scheme's life, and an option for time-weighted distributions. Comments closed on 28 November 2025.

As of 26 October 2026 it is still a draft. The Master Circular, as last updated on 7 September 2026, contains no undrawn-commitment option, and SEBI's circular listings show no final circular on the subject. Check which method your PPM uses, and watch for a final circular before your next commitment.

The rules above are the same for every SEBI-registered AIF. The terms that decide how a capital call feels, such as pace, purpose, notice and default, differ from fund to fund. PMS Sahi Hai is built to help you compare funds and ask sharper questions about them before and after you commit.

• Shortlist on one shelf. The AIF comparison page lets you filter funds by category and compare them side by side. Where a fund has not disclosed a field, the platform shows a blank rather than a guess, and that blank is a question for the manager.
• Ask Nyra the structural questions. Nyra is the platform's AI research analyst. It is grounded in SEBI, AMC and IFSCA primary sources, cites a source for each answer, and declines to answer when no verifiable source exists. Use it to frame questions about first close, investment period and the default clause before you read a PPM end to end.
• Read scores for what they are. Nyra rates strategies on a 0–10 scale across five pillars under a published methodology; strategies with under 12 months of track record are "Not Rated", and a score is not a recommendation. The score is built from disclosed performance, so it does not grade a fund's drawdown schedule or call terms.
• Measure your own return. The guides to XIRR and internal rate of return explain how to track a return when cash goes in and comes out in tranches, which is exactly what your capital call records will let you do.

To be clear about the limits: PMS Sahi Hai does not, from what its pages show, offer a capital call tracker or a drawdown planner, and Nyra is an analytical tool, not a SEBI-registered investment adviser. Your reserve plan and the reading of your contribution agreement stay with you and your advisers.

Most missed calls are liquidity problems, so planning starts the day you sign.

Below is an illustrative plan for a ₹1 crore capital commitment to a Category II fund with a five-year investment period. The call percentages sit within the global 10–25% range; the reserve rule is to hold the next 12 to 18 months of expected calls in cash and short-term, high-quality debt, with the rest of the uncalled amount in investments you could sell if calls come early.

The schedule is hypothetical; your manager's actual drawdown schedule will differ. The point is the shape: the liquid reserve peaks early, then shrinks as the undrawn commitment falls.

Three questions keep the plan honest:

1. How much might be called in the next 12 months? Ask the manager for an indicative schedule and pipeline view.
2. Where will each call come from? Match the next year's likely calls to assets you can turn into cash within the notice period without heavy loss or penalty.
3. What is the worst case? Assume calls come faster than expected while markets fall at the same time.

All cash minimises the risk of missing a call but drags on returns; investing aggressively risks selling at the wrong time. A dedicated funding account avoids selling appreciated holdings, and triggering capital gains tax, to meet a call. Income on the reserve is taxable, so ask a tax adviser how to structure it.

With several AIFs, the problem moves to portfolio level. Institutions use commitment pacing: committing a planned amount each year so distributions from older funds help pay calls from newer ones.

The US consultant NEPC suggests tracking undrawn commitments against total portfolio value and against monthly liquidity. An HNI can use a simpler version: total undrawn commitment across all funds, compared with liquid assets you could raise within two weeks.

Beware over-commitment, relying on distributions to cover later calls: in a downturn, distributions slow while calls continue.

A capital call default happens when an investor does not pay by the due date. Defaults are rare because the consequences are severe.

SEBI does not set a penalty rate or a cure period for a capital call default, but several rules now apply directly:

• Loss of pro-rata rights in that deal. The pro-rata rule does not apply where an investor has defaulted on their contribution to an investment. The others fund it and keep the upside.
• Disclosure of the defaulter regime. SEBI's due-diligence checklist for PPMs asks whether a defaulter is barred from subsequent investments until the default is cured, and what steps the manager will take.
• No co-investment in that company. An investor who has defaulted on an investment cannot co-invest alongside the fund in that investee company.
• Shortfall borrowing at the defaulter's cost. Under SEBI's August 2024 borrowing guidelines, a Category I or II fund may borrow, only in an emergency and as a last resort, when a deal is about to close and the money has not arrived. The loan is capped at the lowest of 20% of the investment, 10% of investable funds, or the undrawn commitment of the other investors. Its cost is charged only to the investors who failed to pay, the route cannot be used to give some investors longer timelines, and there must be a 30-day cooling-off period between borrowings. Category III funds have no such route.

For foreign investors there is one more rule: if an investor stops meeting SEBI's onboarding conditions, the manager may not draw down further capital from them for investments until they qualify again.

Beyond SEBI's floor, contribution agreements usually set out an escalating ladder:

The order, cure period, interest rate and any discount are set by your own documents, not by SEBI, so find the default clause and read it now rather than after a missed payment.

SEBI's AIF (Third Amendment) Regulations of October 2026 are reported to route investor–AIF disputes to mediation, conciliation or arbitration.

The model also has costs that marketing material skips:

• A multi-year contingent liability. You can be asked for a large sum at about two weeks' notice for five years or more, and the commitment is binding after first close.
• Reserve drag on your real return. As the worked example showed, the return on your whole commitment is usually well below the fund's reported IRR.
• IRR can flatter. Later calling raises IRR without improving the underlying deals, which makes funds with different call paces hard to compare.
• Severe default penalties. A single missed call can cost a share of a deal, future participation and, in extreme cases, part of what you have already paid.
• Rules still moving. If SEBI adopts the November 2025 proposal, allocation of later calls could change for new schemes.

A capital call should never be a surprise. In your first year after signing, work through these from the PPM, the contribution agreement and your own records:

• Note your first close date, and whether your commitment can still be reduced.
• Record your committed, called and uncalled capital after every call.
• Confirm the notice period in business days, and when the clock starts.
• Ask for an indicative drawdown schedule for the next three years.
• Read the recall and recycling clauses for distributions.
• Read the default clause: cure period, interest, dilution or forfeiture formula, and shortfall borrowing.
• Confirm your demat account details so units are not parked in escrow.
• Size a funding reserve for the next 12 to 18 months of calls, and stress-test it against a 20% market fall.
• Save each drawdown notice and payment proof for your own XIRR and tax records.

Handled this way, each capital call becomes a planned transfer rather than a scramble, and PMS Sahi Hai's comparison pages and Nyra can help you ask the right questions before your next commitment.

A capital call is where an AIF's promise meets your bank account. Track committed, called and uncalled capital, read the notice and default clauses, keep a funded reserve sized to the next year of calls, and judge funds on both IRR and multiples while tracking your own XIRR on the whole commitment.

When you are ready to weigh your next fund, ask Nyra to compare the AIFs on your shortlist with a source cited for each answer, use the AIF comparison page to see their terms side by side, and book a consultation with the PMS Sahi Hai team to walk through the commitment, capital call and default terms before you sign.