SEBI Widens Intraday Borrowing Norms For Mutual Funds From Sept 1 To Ease Liquidity Mismatches

New Delhi, July 10, 2026: Markets regulator Sebi on Friday expanded the scope of intraday borrowing by mutual funds, allowing asset management companies (AMCs) to use such facilities for a wider range of cash management needs arising from settlement timing mismatches.

The revised framework, which comes into effect from September 1, follows amendments to the Sebi (Mutual Funds) Regulations, 2026, notified on July 3.

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Earlier, mutual funds were permitted to borrow only to meet temporary liquidity needs for redemption and other unitholder payouts, subject to regulatory limits.

Expanded Scope Of Borrowing

Under the revised framework, Sebi has allowed intraday borrowings for pay-in with respect to investments made by the scheme, mark-to-market (MTM) obligations and foreign exchange settlements, and repayment of existing borrowings, in addition to unitholder payouts.

The move is aimed at addressing liquidity mismatches caused by differences in market settlement timings, Sebi said in its circular.

The regulator said intraday borrowing can be availed against receivables expected during the day, including guaranteed inflows such as funds from the RBI, clearing corporations and subscription proceeds received in scheme bank accounts.

It can also be backed by non-guaranteed receivables sighted during the day, including maturity proceeds and secondary market settlements from instruments such as non-convertible debentures (NCDs), commercial papers (CPs), certificates of deposit (CDs) and over-the-counter (OTC) swaps, provided these are expected to be received by the scheme before the end of the day.

In addition, AMCs may avail of intraday borrowing beyond these receivables solely to meet redemption and other unitholder payout obligations permitted under the Mutual Fund Regulations.

Compliance And Oversight

Sebi has made AMCs responsible for ensuring that all intraday borrowings are repaid by the end of the day. Any borrowing that rolls over into an overnight borrowing must remain within the regulatory borrowing limits and be used only for purposes permitted under the regulations.

The regulator has also mandated that the boards of AMCs and trustees approve a policy governing the use of intraday borrowing facilities. The policy, covering aspects such as approval processes and monitoring mechanisms, must be disclosed on the AMC's website.

Further, AMCs have been directed to maintain scheme-wise records explaining the underlying liquidity mismatch and the expected source of repayment for every intraday borrowing.

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Sebi said the cost of intraday borrowing, as well as any loss or additional cost arising from unforeseen events or delays in receiving the expected receivables, will have to be borne by the AMC and not by the mutual fund scheme.

The move came after the Sebi board approved a proposal in this regard in June.

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