SEBI permits net settlement of funds for mutual fund cash market trades from 1 April 2027, while gross securities settlement remains unchanged.
Net Settlement for Mutual Fund Fund Flows from 2027
SEBI has approved scheme-level net settlement of funds for mutual fund cash market trades, effective 1 April 2027. This reform aims to reduce liquidity requirements and operational burden by allowing offsetting of cash inflows and outflows at the scheme level on a settlement day.
However, gross settlement of securities will continue to apply, preserving settlement integrity in the delivery-versus-payment (DvP) mechanism. The change primarily benefits debt and hybrid schemes with high trading frequency, enabling optimized cash management without compromising market stability.
Asset Management Companies must prepare systems for accurate netting calculations and reconciliation. The shift supports operational efficiency in fund operations while maintaining the integrity of the securities settlement process.