Background
The Securities and Exchange Board of India (SEBI), vide Circular No. HO/(92)2026-IMD-POD-2/I/16006/2026 dated July 10, 2026, has introduced a framework permitting mutual funds to avail intraday borrowing facilities. This move follows the amendment to the SEBI (Mutual Funds) Regulations, 2026, carried out through Gazette Notification No. CG-MH-E-07072026-274229 dated July 3, 2026, aimed at addressing liquidity mismatches arising from differences in market settlement timings.
This circular supersedes the guidelines on borrowings of mutual funds specified in clause 5.9.1 of the SEBI Master Circular for Mutual Funds dated March 20, 2026, and SEBI Circular No. HO/(92)2026-IMD-POD-2/I/7885/2026 dated March 25, 2026.
Permitted Purposes for Intraday Borrowing
Mutual funds may avail intraday borrowings for the following purposes:
| S. No. | Purpose |
|---|---|
| 1 | All unitholder pay-outs such as redemptions, IDCW pay-outs, interest, etc. |
| 2 | Pay-in with respect to investments made by the scheme |
| 3 | MTM obligations and foreign exchange settlements |
| 4 | Repayment of existing borrowings |
Quantum Restrictions
The quantum of intraday borrowings is capped with reference to specific categories of receivables:
| S. No. | Category | Description |
|---|---|---|
| 1 | Guaranteed receivables | Inflows from RBI, Clearing Corporations, subscription inflows received in scheme bank accounts, etc. |
| 2 | Non-guaranteed receivables | Inflows sighted during the day such as maturity proceeds and/or secondary market settlement from NCDs, CP, CDs, OTC Swaps, etc., to be received by the scheme by end of day |
| 3 | Additional borrowing | May be availed by AMCs solely for meeting redemption and other pay-outs to unitholders, as specified under Regulation 42(1) of the SEBI (Mutual Funds) Regulations, 2026 |
Compliance Obligations for AMCs
Asset Management Companies are required to comply with the following conditions:
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Repayment discipline: Intraday borrowings must be repaid by end of the day; any conversion into overnight borrowings must remain within regulatory limits and be restricted to purposes permitted under Regulation 42(1).
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Board-approved policy: The Boards of the AMC and Trustees must approve a policy governing the use of the intraday borrowing facility. This policy must be published on the AMC's website and must, inter-alia, cover approval processes and monitoring mechanisms.
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Record maintenance: AMCs must maintain scheme-wise records detailing the underlying liquidity mismatch and the expected source of repayment for each instance of intraday borrowing.
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Regulatory cross-compliance: AMCs must ensure compliance with clauses 6 and 7 of the Fourth Schedule to the SEBI (Mutual Funds) Regulations, 2026, and para 17.7 of the Master Circular.
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Cost allocation: In line with para 11.10 of the Master Circular, the cost of intraday borrowing, if any, shall be borne by the AMC. Any loss or cost arising from unforeseen events or delays in receipt of funds from the receivables listed above shall also be borne by the AMC.
Effective Date
This circular comes into effect from September 1, 2026.
Regulatory Basis
The circular has been issued in exercise of powers conferred under Section 11(1) of the SEBI Act, 1992, read with Regulation 42(2) and Regulation 84 of the SEBI (Mutual Funds) Regulations, 2026, with the objective of protecting investor interests and promoting the orderly development and regulation of the securities market.
Conclusion
This amendment gives AMCs a formal, regulated mechanism to manage short-term liquidity mismatches without resorting to ad hoc arrangements. AMCs should use the runway before the September 1, 2026 effective date to get Board and Trustee approval of the intraday borrowing policy, put monitoring and record-keeping systems in place, and ensure the policy is published on their website well ahead of the deadline.
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