CBLOs owned by equity MFs

Why do so many small cap funds own so much of CBLOs? How are they allowed to own a debt instrument being equity funds?

All funds hold a certain percentage of the AUM as cash to meet redemption requests. This cash is parked in CBLO. This is not just smallcap funds, this is across equity funds. This is so the money doesn’t lie idle.

“Collateralized Borrowing and Lending Obligations is a Money Market Instrument,
approved by RBI (developed by Clearing Corporation of India Ltd). CBLO is a
discounted instrument issued in an electronic book entry form for maturity ranging
from one day to one year.”

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