Sebi allows mutual fund schemes to net cash market settlements
The regulator's move aims to improve operational efficiency and reduce temporary funding requirements for mutual fund schemes.
The Securities and Exchange Board of India (Sebi) has permitted mutual fund schemes to offset purchase and sale obligations for outright cash market transactions, according to reports by Mint and The Economic Times.
Under the new rules, schemes can net eligible obligations within the same settlement cycle. This facility, which was previously granted to foreign portfolio investors earlier this year, is scheduled to come into effect from 1 April 2027.
The framework restricts netting to transactions within a single mutual fund scheme. No inter-scheme funding or adjustments across different schemes of the same fund will be permitted.
To qualify, a transaction must be an outright purchase or sale of a security during a settlement cycle. If a scheme performs both a purchase and a sale of the same security in one cycle, those trades are classified as non-outright and must be settled on a gross basis.
Where outright purchase obligations are higher than sale proceeds, the scheme must fund the remaining amount. Excess proceeds from outright sales cannot be used to cover non-outright purchase obligations.
The Association of Mutual Funds in India (Amfi) will determine implementation standards. Sebi has directed clearing corporations and stock exchanges to update their systems and reporting formats to facilitate the change.