Sebi plans broader use for intraday borrowing by MFs
GS3Economy · S&T · Environment · Security· Capital markets & SEBI· Prelims·
Why in news
Sebi highlighted the necessity of allowing mutual funds broader use of intraday borrowing to manage timing mismatches between redemptions and receivables.
Background
Sebi identified that mutual funds need intraday borrowing to meet redemptions and obligations before specific cut-off times. The regulator noted that current limitations on intraday borrowing restrict fund managers' ability to execute trades during the same day.
Facts for Prelims
- BodySebi: Securities and Exchange Board of India
- FactIntraday borrowing is proposed to address timing mismatches between fund outflows and receivables
- FactRedemptions must be met before specific cut-off times
For Mains
Q. Discuss how regulatory changes in intraday borrowing for mutual funds can enhance liquidity management and investor protection in the Indian capital markets.
Dimensions to cover in your answer
- Liquidity management: Addressing timing mismatches between redemption outflows and asset receivables
- Operational flexibility: Reducing trade execution constraints for fund managers during same-day settlement windows
- Risk mitigation: Balancing enhanced fund management flexibility against potential systemic risks of increased intraday leverage
Keywords: Liquidity management · Capital markets · Regulatory framework · Mutual funds · Intraday borrowing
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