SEBI proposes intraday borrowing for mutual funds, opens consultation
The Securities and Exchange Board of India, or SEBI, is looking to make life easier for mutual funds by proposing a new rule: fund houses could borrow money just for the day to handle things like trade settlements, currency payments, and quick redemptions.
This means they wouldn't need to keep lots of idle cash lying around, and more of your investment could actually stay invested.
Public feedback on this idea is open until June 3.
Borrowing costs stay with fund houses
The cool part: borrowing costs won't get passed on to you: they'll stay with the fund houses.
Overnight borrowing rules still apply, so there are limits in place.
SEBI does point out some risks, like possible delays or counterparty failures during settlements, but says the plan balances flexibility with safety checks.