Securities and Exchange Board of India sets conditions for mutual fund intraday borrowing from September 1

The Securities and Exchange Board of India has issued a circular setting the operating conditions for intraday borrowing by mutual funds after amending the mutual fund regulations to allow such borrowing to address liquidity mismatches caused by differences in market settlement timings. Mutual funds may use the facility for unitholder payouts including redemptions and income distribution cum capital withdrawal payments, pay-ins for investments, mark-to-market obligations and foreign exchange settlements, and repayment of existing borrowings. Borrowing is capped by receivables expected the same day, including guaranteed receivables such as inflows from the Reserve Bank of India, clearing corporations and subscription money received in scheme bank accounts, as well as non-guaranteed receivables sighted during the day such as maturity proceeds and secondary market settlements expected by end of day. Asset management companies may borrow beyond those receivables only to meet redemptions and other permitted unitholder payouts under the regulations. Asset management companies must ensure intraday borrowings are repaid by end of day, with any conversion to overnight borrowing kept within regulatory limits and permitted purposes. Boards of asset management companies and trustees must approve and publish a policy governing use of the facility, while asset management companies must keep scheme-wise records of the liquidity mismatch and expected repayment source. Any borrowing cost, and any loss or cost arising from unforeseen events or delayed receivables, must be borne by the asset management company. The circular supersedes the earlier mutual fund borrowing guidance in the March 20, 2026 master circular and the March 25, 2026 circular. It takes effect on September 1, 2026.