SEBI permits mutual funds to use intraday borrowing for settlement liquidity
AMC treasury and operations teams using intraday borrowing must cap it at receivables sighted, repay by end of day, bar its use as leverage, and operate under a board-approved policy
Change
On 19 June 2026, the Securities and Exchange Board of India (SEBI) approved an amendment to the SEBI (Mutual Funds) Regulations, 2026 permitting mutual funds to avail intraday borrowing for settlement-timing, forex and derivative mark-to-market liquidity mismatches, capped at receivables sighted during the day and subject to end-of-day repayment and an AMC/Trustee-Board-approved utilisation policy.
Why it matters
The facility sits in addition to the existing borrowing of up to 20% of scheme net assets for redemptions; intraday borrowing above the receivables-sighted cap may only fund unitholder pay-outs under Regulation 42(1). AMCs bear responsibility for same-day repayment, must keep any conversion to overnight borrowing within regulatory limits and permitted purposes, and cannot use the facility as a source of leverage. Adequate documentation and a board-approved utilisation policy are required conditions.
Implications
- — AMC treasury and fund-operations teams electing to use intraday borrowing must size it within receivables sighted during the day and ensure end-of-day repayment — borrowing above the cap is permitted only for Regulation 42(1) unitholder pay-outs, and breaching the cap or carrying unrepaid balances is non-compliant.
- — AMCs and trustees must put in place a board-approved facility-utilisation policy and adequate documentation, and ensure the facility is not used as leverage — operating the facility without the approved policy or documentation is non-conformance with the amended Mutual Funds Regulations.
Who is affected
- — AMC treasury and fund-operations teams
- — AMC boards and mutual fund trustees