New Delhi, Sept. 3 -- The Securities and Exchange Board of India (Sebi) has proposed allowing mutual fund schemes to settle cash obligations from stock-market transactions on a net basis, while keeping settlement of securities on a gross, delivery-based basis.

The consultation paper issued on Thursday is aimed at reducing temporary liquidity requirements and improving settlement efficiency for mutual fund schemes. Under the current framework, mutual fund trades are settled on a gross basis. This means a scheme has to arrange money for its purchases separately, even if it is also due to receive money from sales in the same settlement cycle.

The market regulator has proposed allowing net settlement of funds for outright transactions carri...