SEBI Prescribes Conditions and Limits For Intraday Borrowings By Mutual Funds

The Securities and Exchange Board of India (SEBI) on Friday issued a revised framework governing the intraday borrowing facility availed by mutual funds. The circular will come into effect from September 1, 2026.

The circular follows SEBI's amendment to the SEBI (Mutual Funds) Regulations, 2026 permitting intraday borrowings by mutual funds. It supersedes the guidelines on borrowings of mutual funds contained in the SEBI Master Circular for Mutual Funds dated March 20, 2026 and the SEBI Circular dated March 25, 2026.

The revised framework allows mutual funds to avail intraday borrowings for investor payouts, investment-related pay-ins, mark-to-market and foreign exchange settlement obligations, and the repayment of existing borrowings.

The regulator has capped intraday borrowings based on receivables expected by the mutual fund, including guaranteed inflows such as those from the RBI, Clearing Corporations and subscription proceeds, as well as other receivables expected by the end of the day. It has also allowed AMCs to avail additional intraday borrowings solely to meet redemption and other payouts to unitholders.

SEBI has directed AMCs to repay all intraday borrowings by the end of the day. Any borrowing that is converted into an overnight borrowing must remain within the limits prescribed under the SEBI (Mutual Funds) Regulations, 2026.

It has also directed the boards of AMCs and trustees of mutual funds to approve an intraday borrowing policy, publish it on the AMC's website, and put in place an approval and monitoring mechanism. AMCs have also been asked to maintain scheme-wise records of liquidity mismatches and the expected source of repayment.

SEBI has clarified that AMCs will bear the cost of intraday borrowings, as well as any loss or additional cost arising from unforeseen events or delays in receiving funds from receivables.