SEBI allows MFs intraday borrowing for liquidity, other reforms passed

SEBI has approved key regulatory reforms, including allowing mutual funds to use intraday borrowings for liquidity management. The market regulator also greenlit the reintroduction of open market share buybacks and a new fast-track mechanism for AIFs.

The Securities and Exchange Board of India (SEBI) on Friday approved a series of regulatory reforms, including allowing mutual funds to undertake intraday borrowings to manage liquidity mismatches, as the market regulator cleared several measures aimed at easing business operations and strengthening investor protection. The decision was taken at the 214th meeting of the SEBI Board held in Mumbai.

Intraday Borrowing for Mutual Funds

In a key move for the mutual fund industry, the Board approved amendments to the SEBI (Mutual Funds) Regulations, 2026, to facilitate "intraday borrowings availed by mutual funds for managing liquidity mismatches during the day." According to SEBI, the amendment allows mutual funds to use intraday borrowing for "bridging difference arising out of pay-in/pay-out settlement timings within asset classes, forex settlements, payments for MTM of derivative positions etc, subject to certain safeguards." The regulator clarified that the facility is in addition to the existing borrowing limit of up to 20 per cent of a scheme's net assets for meeting redemption-related payouts. SEBI said intraday borrowings "shall not be used as a source of leverage", and it will be the responsibility of asset management companies (AMCs) to ensure such borrowings are repaid by the end of the day.

Open Market Share Buybacks Reintroduced

The Board also approved amendments to the SEBI (Buy-back of Securities) Regulations, 2018, reintroducing open market share buybacks through stock exchanges from August 1, 2026. SEBI said the move is being undertaken "with the objective of providing greater flexibility in undertaking buy-backs, reducing procedural complexity and strengthening investor protection." Under the revised framework, companies will once again be able to undertake buybacks through stock exchanges, in addition to the existing tender offer and book-building routes. The regulator said such buybacks will have to be completed within 66 working days, with at least 40 per cent of earmarked funds deployed in the first half of the buyback period.

GARUDA Mechanism for AIFs

In another ease-of-doing-business measure, SEBI approved the Green-Channel: AIF Rollout Upon Document Acknowledgement (GARUDA) mechanism for Alternative Investment Funds (AIFs). The regulator said the move will "enable faster and more efficient deployment of capital by AIFs." Under the framework, the timeline for launch of new schemes by regular AIFs has been reduced to 10 working days, while accredited-investor-only schemes and angel funds will be allowed to launch immediately after registration or filing of placement documents with SEBI. (ANI)

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