India's SEBI eases intraday borrowing rules for mutual fund companies

The Securities and Exchange Board of India (SEBI) has approved changes to the intraday borrowing framework for mutual fund Asset Management Companies (AMCs). The new norms, effective from mid‑July, permit AMCs to obtain same‑day loans for purposes such as settling payments to unitholders, making investments, meeting mark‑to‑market obligations, foreign‑exchange settlements and repaying loans. All borrowings must be repaid before the trading day closes, and the cost of borrowing is to be borne by the AMC, not by the fund schemes or investors. AMCs must adopt a board‑approved policy on intraday borrowing and disclose it on their websites. The total borrowing by a scheme remains capped at 20% of net assets. The amendments also extend the facility to equity‑oriented index funds and ETFs for covering sell trades that miss the closing auction.

The regulator’s broader amendment, slated to take effect on 1 September, expands the scope of permissible intraday borrowing across the mutual‑fund industry to address short‑term liquidity shortfalls arising from settlement‑timing differences. SEBI cited rising assets under management, which reached about Rs 82.22 lakh crore by the end of June, as a backdrop for the regulatory update.