SEBI Intraday Borrowing Rules for Mutual Funds 2026

  • Blog|News|Company Law|
  • 2 Min Read
  • By Taxmann
  • |
  • Last Updated on 17 March, 2026

Latest from Taxmann

SEBI intraday borrowing mutual funds

Circular No. HO/(92)2026-IMD-POD-2/I/6961/2026; Dated: 13.03.2026

The Securities and Exchange Board of India (SEBI) has introduced revised borrowing provisions under the SEBI (Mutual Funds) Regulations, 2026, effective from 1 April 2026. The framework aims to provide liquidity flexibility to mutual funds while ensuring prudent risk management.

1. Short-Term Borrowings by Mutual Funds

Mutual funds are permitted to undertake short-term borrowings to meet temporary liquidity mismatches, particularly for:

  • Repurchase or redemption of units
  • Payment of interest or IDCW (Income Distribution cum Capital Withdrawal) to unit holders

Such borrowings are subject to the following limits:

  • Borrowings must not exceed 20% of the net assets of the scheme
  • The duration of borrowings must not exceed 6 months

2. Intraday Borrowings

SEBI has provided a specific framework for intraday borrowings, which are exempt from the 20% cap, subject to conditions specified by the Board.

2.1 Permitted Use of Intraday Borrowings

Intraday borrowings can be used only for:

  • Redemption or repurchase of units
  • Payment of interest or IDCW to unit holders

2.2 Limit on Intraday Borrowings

The amount of intraday borrowing must not exceed the guaranteed receivables due on the same day from:

  • Government of India
  • Reserve Bank of India (RBI)
  • Clearing Corporation of India Limited (CCIL)

2.3 Eligible Receivables for Intraday Borrowing

The following receivables on the day of redemption are eligible for calculating the borrowing limit:

  • Maturity proceeds from TREPS (Tri-Party Repo)
  • Proceeds from Reverse Repo transactions
  • Maturity proceeds from G-Secs, Treasury Bills, SDLs, and STRIPS
  • Interest receivable on G-Secs and SDLs
  • Sale proceeds of G-Secs, Treasury Bills, SDLs, and STRIPS

3. Borrowing for Participation in Closing Auction Session

SEBI has also introduced a Closing Auction Session in the equity cash segment of stock exchanges.

In this context:

  • Equity-oriented index funds and equity-oriented ETFs are permitted to borrow
  • Such borrowing is allowed only in cases of under-execution of sell trades
  • The borrowing must be used solely for participation in the Closing Auction Session

4. Objective of the Revised Framework

The new borrowing rules aim to:

  • Provide liquidity support to mutual funds during redemption pressures
  • Ensure efficient fund management without compromising investor interests
  • Maintain prudential limits and safeguards on borrowing
  • Facilitate smoother participation in market mechanisms such as closing auctions

Overall, the framework balances operational flexibility with robust safeguards to protect investors and maintain market discipline.

Click Here To Read The Full Circular

Disclaimer: The content/information published on the website is only for general information of the user and shall not be construed as legal advice. While the Taxmann has exercised reasonable efforts to ensure the veracity of information/content published, Taxmann shall be under no liability in any manner whatsoever for incorrect information, if any.

Taxmann Publications has a dedicated in-house Research & Editorial Team. This team consists of a team of Chartered Accountants, Company Secretaries, and Lawyers. This team works under the guidance and supervision of editor-in-chief Mr Rakesh Bhargava.

The Research and Editorial Team is responsible for developing reliable and accurate content for the readers. The team follows the six-sigma approach to achieve the benchmark of zero error in its publications and research platforms. The team ensures that the following publication guidelines are thoroughly followed while developing the content:

  • The statutory material is obtained only from the authorized and reliable sources
  • All the latest developments in the judicial and legislative fields are covered
  • Prepare the analytical write-ups on current, controversial, and important issues to help the readers to understand the concept and its implications
  • Every content published by Taxmann is complete, accurate and lucid
  • All evidence-based statements are supported with proper reference to Section, Circular No., Notification No. or citations
  • The golden rules of grammar, style and consistency are thoroughly followed
  • Font and size that’s easy to read and remain consistent across all imprint and digital publications are applied

Leave a Reply

Your email address will not be published. Required fields are marked *

«
»

Everything on Tax and Corporate Laws of India

To subscribe to our weekly newsletter please log in/register on Taxmann.com

Author: Taxmann

Taxmann Publications has a dedicated in-house Research & Editorial Team. This team consists of a team of Chartered Accountants, Company Secretaries, and Lawyers. This team works under the guidance and supervision of editor-in-chief Mr Rakesh Bhargava.

The Research and Editorial Team is responsible for developing reliable and accurate content for the readers. The team follows the six-sigma approach to achieve the benchmark of zero error in its publications and research platforms. The team ensures that the following publication guidelines are thoroughly followed while developing the content:

  • The statutory material is obtained only from the authorized and reliable sources
  • All the latest developments in the judicial and legislative fields are covered
  • Prepare the analytical write-ups on current, controversial, and important issues to help the readers to understand the concept and its implications
  • Every content published by Taxmann is complete, accurate and lucid
  • All evidence-based statements are supported with proper reference to Section, Circular No., Notification No. or citations
  • The golden rules of grammar, style and consistency are thoroughly followed
  • Font and size that's easy to read and remain consistent across all imprint and digital publications are applied