The Mutual Fund industry is forced to shut the door for the international funds, all eyes are on RBI right now

By Editorial Team

1. Background

As per SEBI Circular Dated, June 03, 20211, mutual funds are allowed to make overseas investments up to USD 1 billion per mutual fund, with an overall industry limit of USD 7 billion. Earlier, the limit per mutual fund was USD 300 million which was enhanced to USD 600 million by the SEBI through a circular dated Nov 05, 20202. Considering the remarkable growth in the quantum of overseas investments made by mutual funds, the limit per mutual fund was raised to USD 1 billion from the earlier limit of USD 600 million, but the overall industry limit was kept as USD 7 billion as capped by the RBI six years ago through circular dated Jan 1, 20163. At that time also there were rumors that the overall limit may be enhanced by the RBI. However, the overall threshold limit is yet to be notified by the RBI.

2. Overall Industry Limit about to exhaust

As there is an increase in the volume of overseas investments by Mutual funds in the past few years. Fund houses estimate that overseas investments would have crossed (USD6.7billion) as global markets had witnessed a bull run till December. As the overall industry limit is capped asUSD7 billion by the RBI. Currently, Mutual funds are on the verge of crossing the same. The increase in the overall limit by the RBI is the need of the hour. Mutual funds expect the RBI to increase the overseas investment limit fromUSD7 billion to at least USD 15 billion.

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