Sebi Approves Net Settlement for Mutual Fund Cash Market Trades

The Securities and Exchange Board of India has introduced a new framework allowing mutual funds to offset purchase and sale obligations for cash market transactions. This policy, which aligns mutual funds with facilities previously granted to foreign portfolio investors, is scheduled to begin on April 1, 2027.

Under the new rules, netting is permitted only for outright transactions within a single scheme. If a scheme conducts both a purchase and a sale of the same security within one settlement cycle, those trades are excluded from the netting process.

The regulator emphasized that securities must continue to be settled on a gross basis, and no adjustments are allowed between different schemes of the same fund. Furthermore, the framework does not apply to derivatives, short sales, or securities lending and borrowing.

Industry body Amfi will establish implementation standards, while stock exchanges and clearing corporations are tasked with updating their systems to support these changes. Taxes, including stamp duty and securities transaction tax, will continue to be applied on a delivery basis.