SEBI Defers Intraday Borrowing Norms for Mutual Funds to July 2026

India’s mutual fund industry has been granted additional time to prepare for a key regulatory change. The Securities and Exchange Board of India has postponed the implementation of intraday borrowing norms to July 15, 2026, as per its addendum circular dated March 25, 2026. This move offers relief to asset management companies (AMCs) that require more time to align their systems and processes.

Revised Timeline and Preparation Requirements

The intraday borrowing framework was originally scheduled to come into effect on April 1, 2026, as per SEBI’s circular dated March 13, 2026. However, following operational challenges highlighted by the industry, SEBI has deferred the applicability of these guidelines to July 15, 2026.

Before adopting these norms, AMCs must put in place robust internal systems and policies. This includes obtaining board approval and ensuring that risk management, compliance, and operational structures are fully prepared. The additional time is expected to help fund houses transition more smoothly without disrupting existing processes.

Purpose of the Borrowing Framework

The provisions for borrowing are meant to assist mutual fund schemes in meeting their short-term funding requirements. This involves settlement-related requirements, meeting payout obligations like income distributions, and managing redemption pressures.

Most importantly, the framework does not encourage excessive leverage. Instead, it allows mutual fund schemes to manage temporary imbalances in cash flows in a controlled and regulated manner.

Restrictions and Usage Guidelines

Under existing SEBI regulations, mutual fund schemes may borrow up to 20% of their net assets for a maximum of six months for temporary requirements. This applies to general borrowing across schemes.

For instance, exchange-traded funds (ETFs) and equity-oriented index funds are permitted to avail borrowing facilities for specific purposes such as settlement of trades, redemption of units, payment of interest, and distribution-related expenses, subject to SEBI guidelines.

Intraday Borrowing: Safeguards in Place

The process of intraday borrowing follows a specific set of regulations. Unlike general borrowing, the 20% limit does not apply to intraday borrowing; however, such borrowing is strictly capped by same-day guaranteed receivables and regulatory conditions.

These receivables may arise from instruments such as government securities, as well as entities like the Reserve Bank of India (RBI) and the Clearing Corporation of India Limited (CCIL).

To ensure that investors are not burdened with additional costs, SEBI has mandated that any costs or risks associated with intraday borrowing must be borne by the Asset Management Company itself.

What This Means for the Industry

The extension reflects a calibrated and phased approach by SEBI in implementing new regulations. While the framework is designed to strengthen liquidity management, the regulator has provided additional time to ensure smooth adoption.

For investors, the safeguards built into the system are reassuring, indicating that risks are well contained. For fund houses, the extra time is beneficial, but it also places responsibility on them to ensure proper compliance, transparency, and operational readiness.

To know more, read the full circular visit:

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

·       Circular No.: HO/(92)2026-IMD-POD-2/I/7885/2026