# SEBI allows net settlement of funds for mutual fund schemes in cash market from April 1, 2027

URL: https://kasba.co.in/en/story/sebi-allows-net-settlement-of-funds-for-mutual-fund-schemes
Language: en · Section: Money · Published: 2026-11-05
Source: SEBI, "Framework for net settlement of funds for transactions undertaken by mutual fund schemes in cash market", 2026-11-05, https://www.sebi.gov.in/legal/circulars/nov-2026/framework-for-net-settlement-of-funds-for-transactions-undertaken-by-mutual-fund-schemes-in-cash-market_105616.html

In a circular dated November 5, 2026, SEBI permitted net settlement of funds for outright cash market transactions by mutual fund schemes. The framework comes into force on April 1, 2027 and mainly changes how AMCs and custodians settle trades.

## What this means for you

Ordinary investors do not need to do anything. The change is about how mutual fund companies (AMCs) and custodians settle funds, and it can reduce a scheme's short-term funding need. Scheme-wise accounting, NAV and investment limits stay separate as before.

## Key facts

- Circular date: November 5, 2026
- Comes into force: April 1, 2027
- Netting only within the same scheme and same settlement cycle
- No netting across schemes or where a security has both buy and sell
- Securities settlement continues on gross basis
- STT and stamp duty continue on delivery basis

## What has happened

SEBI issued a circular on November 5, 2026 permitting net settlement of funds for outright transactions undertaken by mutual fund schemes in the cash market. The framework comes into force on April 1, 2027.

Under the current rules, institutional investors cannot do day trading, and their cash market transactions are delivery-backed and settled on a gross basis at the custodian or client level. The new decision changes only how funds are settled, not how securities are settled.

## What changes

A mutual fund scheme can now net purchase and sale values of outright transactions within the same settlement cycle. An outright transaction means either a purchase or a sale of a security, not both.

If a scheme has both purchase and sale transactions in the same security within the same settlement cycle, those are treated as non-outright and stay outside netting; they are funded separately on a gross basis. The framework does not apply to derivatives, securities lending and borrowing, short sale-related transactions or anything else not expressly covered.

## Who benefits

SEBI said the aim is to enhance operational efficiency, reduce temporary funding requirements and improve settlement efficiency for mutual fund schemes. According to the circular, a scheme's funding requirement is reduced to the extent netting is permitted.

## What safeguards apply

Netting is allowed only within one scheme. There is no netting across different schemes of the same mutual fund and no adjustment between two or more schemes or portfolios. AMCs and custodians must ensure this does not affect scheme-wise accounting, NAV computation, asset allocation, investment limits or unit-holder interest.

If outright sale value is less than outright purchase value, the scheme funds the residual obligation. If sale value exceeds purchase value, the excess is not adjusted against non-outright purchase obligations. Securities settlement with the custodian stays on a gross basis, and STT and stamp duty continue to be charged on delivery basis.

## What happens next

AMFI, in consultation with clearing corporations, stock exchanges, custodians and other stakeholders, will frame implementation standards. These will cover file formats, settlement timelines, reconciliation, audit trail and handling of rejected or unconfirmed trades.

AMCs and custodians must jointly confirm system readiness before implementation, and trustees will review how the framework is implemented. The circular is available on www.sebi.gov.in under Legal — Circulars.

## Questions and answers

**When does SEBI's net settlement framework come into force?**
From April 1, 2027. The circular states this date.

**Do mutual fund investors need to do anything?**
No. The framework applies to AMCs, custodians, clearing corporations and stock exchanges; investors have no form or application to file.

**Which transactions can be net settled?**
Only outright transactions, meaning either a purchase or a sale of a security in the same settlement cycle. If a scheme has both purchase and sale in the same security in the same cycle, those are not eligible for netting.

**Can transactions of two different schemes be netted together?**
No. Netting is allowed only within the same mutual fund scheme and the same settlement cycle, with no adjustment or funding between schemes.

**How will securities be settled?**
On a gross basis, as before. The circular says netting will not change the delivery-backed nature of institutional trades.

Kasba Desk, Kasba. This routine notice was drafted with AI from an official source and published automatically; an editor reviews it after publishing.