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Informist, Friday, Aug. 21, 2026

 

MUMBAI - The Securities and Exchange Board of India is examining proposals to permit net settlement for mutual fund schemes, Chairman Tuhin Kanta Pandey said at an annual general meeting of the Association of Mutual Funds in India Friday. The market regulator is also considering proposals on permissible activities to be carried out by asset management companies, he said. Further, a working group is reviewing the regulatory framework for mutual fund distributors to harmonise the overlap between them and investment advisers, he said.

 

The SEBI chairman's reference to the net settlement proposal for mutual fund schemes relates to extending the net settlement of funds framework in the equity cash segment of stock exchanges for foreign portfolio investors to mutual funds. After FPIs got the permission, asset management companies have sought a similar framework on the grounds that it would help in their cash management and reduce the amount of intraday borrowings.

 

In April, SEBI had issued a circular allowing FPIs to settle with their custodians funds obligation arising out of their cash market outright sell or purchase trades on a net basis instead of on a gross basis as previously mandated. SEBI had made this allowance based on representations from FPIs and custodians that gross funds settlement of transactions led to liquidity pressures, funding costs due to foreign exchange slippages, and other operational inefficiencies, particularly during periods of index rebalancing.

 

The governance and oversight standards of the mutual funds must keep pace with rapidly growing scale and complexity in the funds industry, the SEBI chairman said at AMFI's annual general meeting. For asset management companies, "fiduciary responsibility must be reflected across the entire value chain--from investment decisions and valuation to distribution, disclosures, and investor servicing," he said. Mutual fund trustees, on the other hand, must ensure they are undertaking independent and informed supervision on behalf of unitholders, Pandey said.  End

 

Reported by Rajesh Gajra

Edited by Rajeev Pai

 

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