Multiple choice

Which of the following is true regarding borrowing powers of a mutual fund?

  1. A mutual fund can not borrow at all

  2. A mutual fund can borrow only up to 20% of net assets

  3. A mutual fund can borrow for a maximum period of one year

  4. A mutual fund can borrow for investment purposes
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

SEBI regulations permit mutual funds to borrow up to 20% of their net assets for temporary liquidity needs. This borrowing cannot be used for investment purposes and is subject to time restrictions. Option A is incorrect because funds CAN borrow within limits. Option C is wrong because the period isn't strictly limited to one year. Option D violates regulations - borrowing is not permitted for investment.

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