SEBI Clarifies Borrowing Rules for Mutual Funds: What Has Changed and Why It Matters
SEBI Clarifies Borrowing Rules for Mutual Funds: What Has Changed and Why It Matters The Securities and Exchange Board of India (SEBI) has issued a circular dated March 13, 2026 , clarifying the rules related to borrowing by mutual funds . The circular is significant because it formally defines the framework for intraday borrowing and also specifies the circumstances in which equity-oriented index funds and equity-oriented ETFs may borrow funds. These changes are linked to the SEBI (Mutual Funds) Regulations, 2026 , which were notified on January 14, 2026 and will come into effect from April 1, 2026 . The circular provides regulatory clarity on an area where the industry was already following an operational practice to manage temporary liquidity mismatches. Why did SEBI issue this circular? In liquid funds and overnight funds , a timing mismatch often arises. Redemption payouts to investors are generally processed in the morning of T+1 day , while maturity proceeds from instrument...
