Mutual Funds can now invest $7 bn overseas

With a view to providing greater opportunity for investment overseas, the aggregate ceiling for overseas investment by Mutual Funds registered with the Securities and Exchange Board of India (SEBI) has been enhanced from USD 5 billion to USD 7 billion with effect from 3rd April 2008.

The existing facility to allow a limited number of qualified Indian Mutual Funds to invest cumulatively up to USD 1 billion in overseas Exchange Traded Funds, as may be permitted by SEBI, shall continue. The investments would be subject to the terms and conditions and operational guidelines as issued by SEBI.

The move is in line with the Reserve Bank of India's stated policy of encouraging flow of money outside the country. However, even the existing limit is not being utilised by Asset management companies. Industry estimates the amount invested overseas at less than $2 billion.

NOTE-To enable the Mutual Funds to tap a larger investible stock overseas, Reserve bank of India has announced on 8th June 2007, that they may also invest in

i) Overseas mutual funds that make nominal investments (say to the extent of 10% of net asset value) in unlisted overseas securities;

ii) Overseas exchange traded funds that invest in securities; and

iii) ADRs/GDRs of foreign companies.
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