Sebi permits mutual fund schemes to net cash market financial settlements

The Securities and Exchange Board of India (Sebi) issued a regulatory update modifying how mutual fund schemes handle cash market fund obligations. Under the revised framework, funds are permitted to net their cash market settlements, streamlining the movement of capital for eligible transactions. However, the regulator maintained the strict requirement that underlying securities must continue to be settled on a gross basis.

Netting allows financial entities to offset incoming and outgoing cash obligations against each other, reducing the total volume of funds that need to be transferred on settlement day. Traditionally, funds had to settle every transaction individually, which tied up significant liquidity throughout the trading day. By permitting fund netting while preserving gross settlement for securities, the regulator balances operational efficiency with systemic risk control.

Compliance officers and fund accountants must update their operational clearing workflows to incorporate the new netting permissions for cash settlements. Operations teams should monitor subsequent clearing corporation circulars for procedural execution guidelines. Bottom line: optimized cash settlements reduce working capital friction for mutual fund schemes.