The Securities and Exchange Board of India (SEBI) on July 10, 2026, issued the notification regarding the Intraday borrowing facility availed by mutual funds.
The following has been stated namely: -
• SEBI has permitted intraday borrowings by mutual funds to address liquidity mismatches arising from differences in market settlement timings.
• The circular supersedes the borrowing guidelines under Clause 5.9.1 of the SEBI Master Circular for Mutual Funds (March 20, 2026) and SEBI Circular dated March 25, 2026.
• Permitted purposes for intraday borrowings include:
o Unitholder payouts (redemptions, IDCW, interest, etc.),
o Pay-ins for scheme investments,
o MTM obligations and foreign exchange settlements,
o Repayment of existing borrowings.
• Borrowing limits are linked to:
o Guaranteed receivables (e.g., RBI, Clearing Corporations, subscription inflows),
o Non-guaranteed receivables expected by end of the day (e.g., maturity proceeds, NCDs, CPs, CDs, OTC swaps).
• Additional intraday borrowing may be availed by AMCs solely to meet redemption and other unitholder payout obligations under Regulation 42(1) of the SEBI (Mutual Funds) Regulations, 2026.
• AMCs must ensure that intraday borrowings are repaid by the end of the day. Any borrowings extending overnight must comply with existing regulatory limits and permitted purposes.
• Boards of AMCs and Trustees must approve a policy governing intraday borrowings, covering approval processes, monitoring mechanisms, and related controls. The policy must be published on the AMC's website.
• AMCs are required to maintain scheme-wise records of liquidity mismatches and the expected source of repayment for every intraday borrowing.
• All costs and losses arising from intraday borrowings, including delays in receiving expected receivables, must be borne by the AMC and cannot be charged to the mutual fund schemes.
• The circular comes into force on September 01, 2026 and is issued under the powers conferred by the SEBI Act, 1992 and the SEBI (Mutual Funds) Regulations, 2026.
[Notification No. HO/(92)2026-IMD-POD-2/I/16006/2026]
