SEBI approves intraday borrowing framework for mutual funds

The Securities and Exchange Board of India (SEBI) has approved amendments to the SEBI (Mutual Funds) Regulations, 2026. The changes allow mutual funds to avail intraday borrowings to manage temporary liquidity mismatches during the day.

The decision was approved at the regulator's board meeting held on 19 June 2026.

Under the revised framework, mutual funds will be permitted to use intraday borrowings to bridge funding gaps arising from differences in settlement timings. These include pay-in and pay-out mismatches across asset classes, foreign exchange settlements and mark-to-market (MTM) payments on derivative positions.

SEBI said the facility will be in addition to the existing provision that allows mutual fund schemes to borrow up to 20% of their net assets to meet unitholder payouts such as redemptions.

The regulator said intraday borrowings will be capped at the value of receivables expected during the day. Borrowings above this limit will be permitted only for meeting unitholder payout obligations as specified under the regulations.

Asset management companies (AMCs) will be required to ensure that all intraday borrowings are repaid by the end of the day. Any borrowing that rolls over into an overnight position must remain within the existing regulatory limits and be used only for purposes permitted under the regulations.

SEBI clarified that intraday borrowings cannot be used as a source of leverage. Mutual funds will also be required to maintain adequate documentation and adopt a policy governing the use of the facility, subject to approval by the AMC board and trustees.

The regulator said the proposal was finalised after public consultation in May 2026 and discussions with the Mutual Fund Advisory Committee (MFAC), industry associations and other stakeholders.

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