RBI relaxes norms for MFs' overseas investments

Reserve Bank of India (RBI) has raised the ceiling of investments that can be made by registered domestic mutual funds in overseas markets besides expanding the investment options available to them.

A RBI notification, which gave details of the liberalised norms regarding overseas investments by MFs registered with the Securities & Exchange Board of India, said the aggregate ceiling for overseas investment by the funds has been increaseed from $1 billion to $2 billion with immediate effect.

A limited number of qualified Indian mutual funds have also been permitted to invest cumulatively up to $1 billion in overseas exchange traded funds (ETFs), but subject to SEBI permission.

Mutual funds, presently, are permitted to invest in ADRs/GDRs of Indian companies, rated debt instruments and equity of overseas companies listed on a recognised stock-exchange overseas and having a shareholding of at least 10% in a listed Indian company. Now, with a view to enable MFs to tap a larger investible stock overseas, this requirement of 10% reciprocal shareholding in listed Indian companies by such overseas companies has been dispensed with.

The apex bank stated that detailed operational guidelines including eligibility criteria, limits, identification of recognised stock-exchanges, investible universe, monitoring of agregate ceilings, etc. would be issued by Sebi.

Necessary amendments to the Foreign Exchange Management (transfer or issue of any foreign security) Regulation, 2004, will be issued separately, the central bank said.