SEBI allows mutual funds intraday borrowing to fix cashflow timing mismatches
New rules permit AMCs to borrow within the day when scheme outflows exceed inflows, smoothing liquidity without violating existing borrowing limits—subject to conditions SEBI will prescribe.
What changed
- Regulation 42(2) now explicitly allows intraday borrowing to address timing mismatches between scheme outflows and inflows.
- Amendment published in Gazette on July 3, 2026, effective immediately.
The read
SEBI has brought common sense to a recurring operational headache. Until now, mutual fund schemes faced ambiguity on whether borrowing within a single trading day violated the restrictions in Regulation 42(1). The amendment makes it explicit: intraday borrowing to bridge a timing gap between outflows and inflows is allowed, subject to conditions the regulator will lay out separately. The practical impact is narrow but real: AMCs can now manage redemption spikes or settlement lags without restructuring or gating schemes. The conditions SEBI eventually writes will determine how much flexibility this actually unlocks. For now, it is a clarification, not a relaxation, but it signals that SEBI sees liquidity management as a micro-problem best solved with micro-tools.
Primary source: official circular (PDF)