Addressing liquidity mismatches
The revised framework also allows mutual funds to use intraday borrowings for pay-in obligations on scheme investments, mark-to-market (MTM) obligations, foreign exchange settlements, and repayment of existing borrowings.
The move is aimed at addressing liquidity mismatches due to differences in market settlement timings.
To facilitate this, mutual funds can borrow against guaranteed receivables such as subscription inflows and payments from the Reserve Bank of India (RBI).
Borrowing against non-guaranteed receivables
The revised framework also allows mutual funds to borrow against non-guaranteed receivables expected to be realized by the end of the trading day.
These include maturity proceeds and secondary market settlements involving instruments like non-convertible debentures, commercial papers, certificates of deposit, and over-the-counter swaps.
SEBI has also allowed AMCs to avail additional intraday borrowings exclusively for redemption requests and other unitholder payout obligations under the Mutual Funds Regulations, 2026.
Key compliance requirements for AMCs
AMCs have to ensure all intraday borrowings are repaid before the trading day ends.
Any borrowing extending overnight must comply with regulatory limits and permissible purposes.
The boards of AMCs and trustees of mutual funds have been directed by SEBI to approve a policy governing the use of this facility, which should be published on the AMC’s website.
Costs to be borne by AMCs
SEBI has clarified that the cost of intraday borrowings and losses due to delays in receiving expected funds will be borne by the AMC. These costs are not to be passed on to mutual fund investors.
The circular operationalizing amendments to the SEBI (Mutual Funds) Regulations, 2026 was issued on Friday and will come into effect from September 1, 2026.