SEBI approves intraday borrowing for mutual funds
16 March 2026 India
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The Securities and Exchange Board of India (SEBI) has approved new rules to allow mutual funds to enter into formal intraday borrowing arrangements with financial institutions.
The move intends to bridge the intraday timing mismatch of inflow and outflow of funds.
As per prevalent industry practice, primarily for liquid and overnight schemes, the redemption payouts to investors are processed in the morning hours of T+1 day whereas the mutual fund schemes receive the maturity proceeds from TREPS — a short term money market tool — and reverse repo in the evening hours of T+1 day.
According to Priyanka Mahapatra, General Manager of Investment Management Department at SEBI, SEBI (Mutual Funds) Regulations, 2026 will come into force from 1 April.
Intraday borrowings shall be used only for the purpose of repurchase or redemption of units; payment of interest or Income Distribution cum Capital Withdrawal payout to the unitholders.
Mahapatra adds that the amount of intraday borrowings shall not exceed the guaranteed receivables due on the same day from Government of India, Reserve Bank of India, and Clearing Corporation of India.
The following receivables on the day of redemption shall be eligible for intraday borrowings: maturity proceeds from TREPS; proceeds from reverse repo; maturity proceeds from G-Sec, T-Bill, SDL, and STRIPS; interest on G-Sec/ SDL; sale proceeds of G-Sec, T-Bill, SDL, or STRIPS.
The cost of intraday borrowing, if any, shall be borne by the AMC. Further, any loss or cost incurred, on account of any unforeseen event or delay in receiving the funds from receivables shall be borne by the asset management company.
The move intends to bridge the intraday timing mismatch of inflow and outflow of funds.
As per prevalent industry practice, primarily for liquid and overnight schemes, the redemption payouts to investors are processed in the morning hours of T+1 day whereas the mutual fund schemes receive the maturity proceeds from TREPS — a short term money market tool — and reverse repo in the evening hours of T+1 day.
According to Priyanka Mahapatra, General Manager of Investment Management Department at SEBI, SEBI (Mutual Funds) Regulations, 2026 will come into force from 1 April.
Intraday borrowings shall be used only for the purpose of repurchase or redemption of units; payment of interest or Income Distribution cum Capital Withdrawal payout to the unitholders.
Mahapatra adds that the amount of intraday borrowings shall not exceed the guaranteed receivables due on the same day from Government of India, Reserve Bank of India, and Clearing Corporation of India.
The following receivables on the day of redemption shall be eligible for intraday borrowings: maturity proceeds from TREPS; proceeds from reverse repo; maturity proceeds from G-Sec, T-Bill, SDL, and STRIPS; interest on G-Sec/ SDL; sale proceeds of G-Sec, T-Bill, SDL, or STRIPS.
The cost of intraday borrowing, if any, shall be borne by the AMC. Further, any loss or cost incurred, on account of any unforeseen event or delay in receiving the funds from receivables shall be borne by the asset management company.
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