Sebi permits mutual funds to net cash obligations from April 2027

The Securities and Exchange Board of India (Sebi) has cleared a mechanism enabling mutual fund schemes to net their cash market obligations, a move designed to streamline settlement processes and enhance operational efficiency across the industry.

Under the new framework, mutual fund schemes will be permitted to offset their cash market funds payable against receivables within the same scheme during each settlement cycle. This netting arrangement will commence from April 1, 2027, providing funds with a more flexible approach to managing their daily cash positions and settlement obligations.

The facility is expected to reduce the administrative burden on mutual funds while minimizing counterparty risk and improving liquidity management. By allowing schemes to net payables against receivables in a single settlement cycle, the mechanism enables more efficient use of capital and reduces the volume of gross cash flows required for settlement purposes.

The regulatory approval reflects Sebi's broader efforts to modernize India's mutual fund infrastructure and align domestic practices with international standards. The implementation timeline provides the industry sufficient opportunity to prepare operational systems and protocols necessary for seamless execution of the netting arrangements.