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SEBI Unlocks Intraday Borrowing for Mutual Funds
13 Mar
Summary
- Mutual funds can now use intraday borrowing for redemptions.
- Borrowing limits are tied to guaranteed receivables.
- Costs for intraday borrowing must be borne by AMCs.
The Securities and Exchange Board of India (SEBI) has issued a new circular permitting mutual funds to utilize intraday borrowing. This measure, effective from April 1, 2026, formalizes a common industry practice of bridging temporary cash flow gaps to meet investor redemption payouts.
The framework specifies that intraday borrowing is strictly for purposes such as redemption payments and unit repurchases. The borrowing amount cannot exceed guaranteed receivables due on the same day from entities like the Government of India. Costs associated with this borrowing will be the responsibility of the asset management companies (AMCs), not the mutual fund schemes.
Additionally, SEBI has clarified rules for equity-oriented index funds and ETFs, allowing borrowing solely to participate in the stock exchange closing auction session, commencing August 3, 2026. These regulations aim to protect investors and ensure smoother mutual fund operations.
