.png "SEBI Allows Intra‑Day MF Borrowing")
- Reason: To solve the T+1 mismatch—investors expect redemption money in the morning, but inflows from TREPS/reverse repos reach funds only in the evening.
- Earlier practice: Fund houses relied on informal, ad‑hoc day‑loans to bridge this timing gap.
- New Rule: Intra‑day borrowings are exempt from the 20% borrowing cap, provided they are backed by guaranteed same‑day receivables from secure sources (GoI, RBI, CCIL).
- Usage restricted: Funds can deploy borrowed money only for redemptions, repurchases, or IDCW payouts, not for market speculation.
- Investor protection: All costs (interest, fees, losses) must be borne by the AMC, not charged to the scheme or investors.
- Significance: Formalizes a crucial operational practice, ensures smooth liquidity management, strengthens investor confidence, and enhances transparency in liquid/overnight schemes.
- Impact: Aligns India’s mutual fund operations with global best practices, reducing systemic risk while safeguarding retail investors.
Question:
Q.1 Under the new SEBI framework for intra-day borrowing, which of the following conditions exempts such borrowing from the statutory 20% borrowing cap?a) The borrowing is used to purchase additional securities for speculative gains.
b) The borrowing is backed by guaranteed same-day receivables from secure sources like GOI, RBI, or CCIL.
c) The borrowing is unsecured and sourced from a foreign portfolio investor.
d) The borrowing is utilized for a duration exceeding 90 days.
Answer: b) Intra‑day borrowings are exempt from the 20% borrowing cap, provided they are backed by guaranteed same‑day receivables from secure sources (GoI, RBI, CCIL).
