SEBI permits mutual fund intraday borrowing under conditions, effective 1 September 2026
Mutual funds and AMCs must operate intraday borrowing only within SEBI's permitted purposes and receivable-based limits, under a board- and trustee-approved published policy, from 1 September 2026
Change
On 10 July 2026 SEBI issued a circular permitting mutual funds to avail intraday borrowings to manage settlement-timing liquidity mismatches, subject to binding conditions: defined permitted purposes, receivable-based quantum limits, mandatory end-of-day repayment, a board- and trustee-approved policy published on the AMC website, scheme-wise recordkeeping, and AMCs bearing all associated cost and loss. Backed by a 3 July 2026 amendment to the SEBI (Mutual Funds) Regulations, 2026, it supersedes the prior borrowing guidelines and takes effect 1 September 2026.
Why it matters
The facility is an enablement wrapped in obligations: mutual funds may borrow intraday only for unitholder pay-outs, investment pay-in, MTM and FX settlements, and repayment of existing borrowings, and only up to guaranteed and same-day non-guaranteed receivables (with a narrow AMC extension for meeting redemptions under Regulation 42(1)). AMCs must ensure same-day repayment, keep any overnight conversion within regulatory limits, maintain scheme-wise records of the liquidity mismatch and repayment source, and absorb the cost of borrowing and any loss from delayed receivables themselves. Before the 1 September 2026 effective date, each AMC and trustee board must approve and publish a policy governing the facility, including approval processes and monitoring.
Implications
- — AMCs and mutual fund trustees must, before 1 September 2026, approve a policy governing use of the intraday borrowing facility — covering approval processes and monitoring — and publish it on the AMC website; without an approved, published policy the fund cannot properly avail the facility.
- — AMCs must confine intraday borrowing to the permitted purposes and to guaranteed and same-day non-guaranteed receivables, ensure repayment by end of day, and keep any conversion to overnight borrowing within Regulation 42(1) limits — breaching the purpose or quantum conditions is non-compliance with the superseding framework.
- — AMCs must maintain scheme-wise records of the underlying liquidity mismatch and expected repayment source, comply with the Fourth Schedule (clauses 6 and 7) and Master Circular para 17.7, and bear the cost of intraday borrowing and any loss from delayed or unforeseen receivable shortfalls themselves rather than charging it to the scheme.
Who is affected
- — Mutual funds and Asset Management Companies (AMCs)
- — Trustee companies and boards of trustees of mutual funds
- — AMC compliance and fund-operations teams responsible for scheme liquidity and recordkeeping
What to watch
- — Comes into effect: 1 September 2026 — intraday borrowing conditions apply from this date; AMCs and trustees should have the board-approved, website-published policy and scheme-wise recordkeeping in place before then.