The Securities and Exchange Board of India (SEBI) has set rules for intraday borrowings by mutual funds, effective April 1, 2026.
The move aims to help funds manage short-term timing mismatches in cash flows, especially in liquid and overnight schemes.
Sometimes, funds face a delay between redemption payouts in the morning and receipt of maturity proceeds in the evening from instruments like TREPS and reverse repos.
To bridge this gap, mutual funds can now borrow money for intraday needs under strict conditions.
How Intraday Borrowings Will Work
SEBI has outlined clear rules for using intraday borrowings:
Funds can use it only for repurchase/redemption of units or payment of interest/Income Distribution payouts to unitholders.
Borrowed amounts cannot exceed receivables due the same day from the Government of India, RBI, or Clearing Corporation of India.
Eligible receivables include TREPS maturity proceeds, reverse repo proceeds, G-Sec/T-bill/SDL/STRIPS maturity proceeds, interest on securities, and sale proceeds of securities.
Additionally, Asset Management Companies (AMCs) must adopt formal policies approved by their Board and Trustees, and these policies must be uploaded on their website.
Costs and Special Cases
Any cost or loss from intraday borrowings will be borne by the AMC, including delays or unforeseen events.
Equity-oriented index funds and ETFs can borrow only in specific cases, such as participating in the Closing Auction Session on stock exchanges.
This rule aligns with SEBI’s closing auction session guidelines, coming into effect August 3, 2026.
SEBI emphasizes that these measures are designed to protect investors and ensure the orderly functioning of the securities market.
