Mutual fund schemes can net fund obligations on outright cash trades from 1 April 2027; securities stay gross
TaxByKK · Compliance News · taxbykk.com5 Nov 2026
In short
SEBI will let a mutual fund scheme net its fund obligations for outright purchases and sales in the cash market within the same settlement cycle, while securities continue to settle gross. This reduces temporary funding needs. The circular dated 5 November 2026 comes into force on 1 April 2027.
- Authority
- SEBI, Investment Management Department
- Circular
- HO/24/13/(1)2026-IMD-POD-2/I/25242/2026 dated 5 November 2026
- Type
- Circular
- Effective from
- 1 April 2027
- Modifies
- Para 4 of Annexure 3, Chapter 1 (Trading) of the Master Circular for Stock Exchanges and Clearing Corporations dated 30 December 2024
- Addressed to
- Mutual funds, AMCs, trustees, custodians, clearing corporations, stock exchanges, brokers and AMFI
What changed
| Item | Before | Now |
|---|---|---|
| Fund settlement for mutual fund cash trades | Gross, at custodian or client level | Net, within the same scheme and the same settlement cycle, for outright transactions only |
| Securities settlement | Gross | Still gross between the scheme and the custodian |
| STT and stamp duty | On delivery basis | Unchanged, still on delivery basis |
| Same-security buy and sell in one cycle | — | Treated as non-outright and excluded from netting |
No netting across schemes of the same fund, and no inter-scheme funding. Derivatives, securities lending and borrowing, short sales and other uncovered transactions are excluded. Where sales are less than purchases the scheme funds the shortfall; excess sale proceeds cannot be set against non-outright purchases. AMFI will frame the implementation standards with clearing corporations, exchanges and custodians, and AMCs and custodians must jointly confirm system readiness. The circular follows SEBI's 24 April 2026 permission for FPIs, to be implemented by 31 December 2026.
Who it applies to
- Mutual fund AMCs, trustees and schemes
- Custodians, stock brokers, stock exchanges and clearing corporations
- AMFI
- CAs and lawyers advising mutual funds
What to do
- Build scheme-wise identification of outright purchases, outright sales, non-outright trades, gross and net fund obligations and securities pay-in and pay-out.
- Keep a custodian audit trail of gross obligations, netted obligations and excluded transactions.
- Make sure netting does not affect scheme accounting, NAV, asset allocation or investment limits.
- Follow AMFI's implementation standards when issued and confirm system readiness jointly before 1 April 2027; trustees to review implementation in unit-holders' interest.
Reference
SEBI circular HO/24/13/(1)2026-IMD-POD-2/I/25242/2026, 5 November 2026, Framework for net settlement of funds for transactions undertaken by mutual fund schemes in cash market; issued under section 11(1) of the SEBI Act, 1992 read with regulation 84 of the SEBI (Mutual Funds) Regulations, 2026.
Read the official PDF: SEBI circularWritten by TaxByKK from the official notification. Check the official text before you act on it.
Frequently asked questions
What does the circular allow?
Net settlement of funds, scheme by scheme, for outright cash-market purchases and sales by mutual funds in the same settlement cycle.
Is netting allowed across schemes?
No. Netting is only within one scheme and one settlement cycle.
Does securities settlement change?
No. Securities continue to settle gross, and STT and stamp duty stay on delivery basis.
When does it start?
1 April 2027.