The Securities Exchange Board of India (SEBI) on May 13, 2026, issued a Consultation Paper on the utilization of intraday borrowing lines by Mutual Funds.
The following has been stated:
• The proposal follows representations from AMFI regarding operational liquidity mismatches arising due to differences in settlement timings for redemptions, trade obligations, TREPS deployments, forex settlements, derivative mark-to-market obligations, and other payouts. SEBI had earlier permitted intraday borrowings under the SEBI (Mutual Funds) Regulations, 2026, effective from April 01, 2026, mainly for meeting redemption payouts backed by guaranteed receivables from entities such as the Government of India, RBI, and CCIL. Operational safeguards, including board-approved policies, segregation of assets and liabilities, and AMC-borne borrowing costs, were prescribed through a circular dated March 13, 2026, though implementation was later deferred till July 15, 2026, due to operational challenges raised by the industry.
• AMFI has now clarified that intraday borrowings are commonly used not only for redemption payouts but also for managing timing mismatches in trade settlements, forex transactions, derivative obligations, and other liquidity requirements. It also stated that such borrowings may exceed both guaranteed and non-guaranteed receivables during the day, provided they are extinguished by the end of the day or converted into overnight borrowings within the regulatory limits prescribed under Regulation 42(1) of the SEBI (Mutual Funds) Regulations, 2026.
• In view of these operational requirements, SEBI has proposed allowing mutual funds to use intraday borrowing facilities for purposes beyond redemption payouts, permitting borrowings not restricted to guaranteed receivables, and allowing the borrowing amount to exceed receivables, subject to compliance with overnight borrowing norms if carried forward. SEBI has also proposed that any borrowing cost for availing intraday facilities should continue to be borne by the Asset Management Companies (AMCs).
• Public comments on the proposals have been invited till June 03, 2026.
