Mumbai, Feb. 20 -- The Indian market regulator's proposal to reduce the minimum investment limit in social impact funds (SIFs) has raised concerns that it might result in mis-selling for retail investors, even as the industry welcomes it as a step to increase participation in the segment.

In a consultation paper released on 9 February, the Securities and Exchange Board of India (Sebi) suggested reducing the minimum investment threshold for investors in alternative investment funds (AIFs) linked to social impact causes to Rs.1,000 from Rs.2 lakh. The sharp reduction is expected to allow retail investors into a segment that has so far only focused on high-ticket, sophisticated participants.

The move seeks to align the AIF regulations with...