A PMS fund manager said: "It is relatively easier to get approvals for PMS services than VC funds. With a PMS registration, these funds will be able to invest in listed and unlisted companies without really having to disclose much about their investments."

Violating relevant Sebi PMS rules, most of these funds are targeting live real estate projects, which are facing tough times as a result of lower sales and higher borrowing costs.

"Overseas funds stand to benefit greatly from this arrangement as VC funds investing into India no longer enjoys tax pass-through benefits, even if they are registered in tax havens like Mauritius or Cayman Islands.

However, the modus operandi of bringing in money to India is not very clear as of now," said a Mumbai-based wealth manager.