New Delhi, April 6 -- India's mutual fund body has asked the market regulator to allow fund houses to use intraday borrowings from banks to purchase securities after it deferred implementation of the new norms to July, according to two people aware of the development.

On 13 March, the Securities and Exchange Board of India (Sebi) tightened regulations and allowed fund houses to borrow funds from banks on an intraday basis only for repurchase or redemption of units, payment of interest, or income distribution-cum-capital withdrawal payouts to unitholders. The new rules were to have become effective on 1 April, Sebi said in a circular.

"The circular will tie up mutual funds' hands. Mutual funds have told the Association of Mutual Funds in...