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SEBI Allows Mutual Funds to Undertake Intra-Day Borrowing to Manage Cash Mismatches
Mar 14, 2026The Securities and Exchange Board of India (SEBI) has issued a circular permitting mutual funds to undertake intra-day borrowing to address temporary cash mismatches while processing investor redemptions.
Under existing regulations, mutual funds are allowed to borrow up to 20% of a scheme’s net assets for a maximum period of six months to meet obligations such as redemption payments, income distribution, or settlement of certain trades. However, SEBI clarified that this 20% borrowing limit will not apply to intra-day borrowings, provided they adhere to specific conditions laid down by the regulator.
According to the circular, intra-day borrowing may be used only for the repurchase or redemption of units or for the payment of interest or Income Distribution cum Capital Withdrawal (IDCW) to unit holders.
SEBI has also placed a cap on such borrowing. The amount borrowed intra-day must not exceed the guaranteed receivables due on the same day from the Government of India, the Reserve Bank of India, and the Clearing Corporation of India Limited.
The new framework will come into effect from April 1.
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