SEBI Proposes Wider Use Of Mutual Fund Intraday Borrowings Beyond Redemption Payout Needs

The Securities and Exchange Board of India (SEBI) has proposed recognising intraday borrowing facilities used by mutual funds as a cash management tool.

If approved, this would allow mutual funds to use such borrowing lines beyond meeting redemption payout timing mismatches, including for trade settlements, forex settlements and derivative obligations.

SEBI said the carve-out for intraday borrowings in the SEBI (Mutual Funds) Regulations, 2026 was enabled after representations from the Association of Mutual Funds in India (AMFI), which had sought flexibility to bridge timing gaps between redemption payouts and receipt of guaranteed receivables due on the same day.

The regulator observed that mutual funds avail intraday borrowings from banks to meet liquidity requirements arising from timing mismatches between scheme outflows and receivables from different sources. It further noted that such facilities are also availed for trade settlements, forex settlements, derivative obligations and repayment of existing borrowings.

It stated that absence of such intraday borrowings would impact fund management flexibility and returns of the scheme.

Accordingly, SEBI has sought comments on proposals to allow Asset Management Companies to avail intraday borrowings for purposes beyond redemption or unitholder payouts, and to permit such borrowings to exceed receivables, provided any intraday borrowing converted into overnight borrowing remains within regulatory limits.

Public comments have been invited till June 3, 2026.