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The Securities and Exchange Board of India (SEBI) has issued a circular regarding borrowing by mutual funds clarifying the framework for intraday borrowings and borrowings by certain index funds and exchange traded funds. The circular sets out conditions under which mutual funds may undertake intraday borrowing arrangements to address timing mismatches between redemption payouts and receipt of maturity proceeds from investments. The circular sets out: Intraday borrowing framework which prescribes that mutual funds may undertake intraday borrowings to bridge temporary timing mismatches between redemption payouts to investors and receipt of funds from instruments such as TREPS, reverse repo, and government securities. Policy approval requirement mandating asset management companies establish a policy governing intraday borrowing, which must be approved by the boards of both the company and the trustees and disclosed on the company’s website. Permitted purpose of intraday borrowings which specifies that it may only be used  for repurchase or redemption of units or payment of interest or income distribution to unitholders. Borrowing limits which prescribes that the amount of intraday borrowing must not exceed the guaranteed receivables due on the same day from specified sources, including maturity proceeds from TREPS, reverse repo transactions, and government securities. Cost allocations under which any cost of intraday borrowing, or losses arising from delays in receiving the underlying receivables, must be borne by the asset management company, and not by the scheme. Borrowing by equity-oriented index funds and ETFs under which borrowings due to under-execution of sell trades are permitted only for the purpose of participating in the closing auction session in the equity cash segment of stock exchanges. The circular takes effect on April 1, 2026.