SEBI gives nod to intraday borrowing by MFs with riders
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New Delhi: Capital markets regulator, the Securities and Exchange Board of India (SEBI), declared that it has allowed mutual funds to undertake intraday borrowings under specified conditions to manage short-term liquidity mismatches.
In a circular, SEBI said the new framework will come into effect from April 1, 2026.
According to the regulator, mutual funds -- particularly liquid and overnight schemes -- often face an intraday mismatch between redemption payouts to investors and the receipt of maturity proceeds from instruments such as TREPS and reverse repo transactions.
To address this issue, SEBI has permitted mutual funds to access intraday borrowing facilities from financial institutions such as banks to bridge the temporary gap between inflows and outflows of funds. The market watchdog also clarified that while borrowings by mutual fund schemes are generally capped at 20 per cent of the scheme’s net assets and limited to a maximum duration of six months, this limit will not apply to intraday borrowings, subject to certain safeguards.
Under the new framework, asset management companies (AMCs) must obtain approval from their board as well as the board of trustees for the use of intraday borrowing facilities.
