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Indian stock market regulator SEBI has announced a historic change in a very important rule to the operation and liquidity management of the mutual fund industry. In order to make the functioning of the market more smooth and investor friendly, SEBI has significantly expanded the scope of ‘Intraday Borrowing’ which can be taken and repaid during the trading session. This new financial framework notified by the regulator will become officially effective across the country from September 1, 2026. Let us tell you that under the old rules, mutual fund houses were allowed to take limited loans only to meet extremely emergent or temporary cash needs, within strict regulatory limits.

There will be rocket-like speed in payments: Borrowing will be used for redemption and dividend of unitholders.

Under the new guidelines issued by SEBI, now all mutual fund companies (AMCs) will be able to freely avail this intraday borrowing facility for immediate settlement of various types of payments made to their unitholders such as redemption (withdrawal of money), IDCW (dividend payment) and interest payment. Additionally, fund houses will also be able to use this short-term capital to meet daily investment payments made by the schemes, repay mark-to-market (MTM) liabilities, forex settlements and refinance their old ongoing loans. However, SEBI has imposed a very strict financial condition that all borrowings taken during the trading session must be repaid before the end of the same trading day. If a loan is carried forward to the next day, it will be treated as direct overnight borrowings and will attract strict regulatory restrictions.

Investors will not be burdened even by ₹1: Big action by regulator to deal with liquidity crisis

Market regulator SEBI has taken this big and bold step primarily to effectively manage the differences in market settlement timings and the resulting short-term liquidity crunch. This new order will be mandatorily applicable to all active mutual funds, asset management companies (AMCs), trustee companies, trustee boards and Association of Mutual Funds in India (AMFI) in the country. The biggest and most relieving thing about this entire amendment is that the interest and all other administrative expenses on this intraday borrowing will be borne by the mutual fund company itself (AMC) from its corporate funds. There will be no additional burden of even ₹1 on the returns of mutual fund schemes or common investors.

Country’s assets reach record level: Investment in equity mutual funds jumped 26% in June

This historic regulatory change comes at a time when domestic investor confidence in mutual funds remains at record levels despite the ongoing volatility in the Indian stock markets. According to the latest monthly data released by AMFI, the inflow of investors in equity (share based) schemes increased by 26 percent to Rs 28,973 crore in the month of June, which was Rs 22,908 crore in May. However, huge outflows of Rs 1.09 lakh crore were recorded from debt (bond based) schemes due to corporate advances and tax payments, taking the total net outflow from the mutual fund industry in June to Rs 52,949 crore. Amidst all these huge fluctuations, the total assets under management (AUM) of the Indian mutual fund industry has increased to an all-time high of Rs 82.22 lakh crore at the end of June from Rs 81.60 lakh crore recorded at the end of May.