Foreigners can invest directly in mutual funds

Foreigners can invest directly in mutual funds

Mumbai: Indian mutual funds can now directly accept subscriptions from foreign investors for their equity schemes up to a limit of $10 billion, a move that will further liberalize the portfolio investment route and widen the foreign investor base of the domestic equity markets.

Foreign investors have also been permitted to invest an additional $3 billion in mutual fund debt schemes that invest in infrastructure bonds, according to guidelines notified by the Reserve Bank of India and the Securities and Exhange Board of India (Sebi).

So far only foreign institutional investors (FIIs) and overseas Indians were allowed to buy units of domestic mutual funds.

Finance minister Pranab Mukherjee announced in this year’s budget that foreign investors will be allowed to invest in equity schemes of mutual funds. But now the scope has been widened to debt schemes of mutual funds after a representation by the industry to the finance minister.

Foreign investors who meet know your customer requirements can invest directly through the Sebi-registered depository participant route or indirectly through the unit confirmation receipt route.

Foreign investors, however, can only purchase units, which are directly issued by domestic mutual funds, and cannot purchase from the secondary market. Sebi will monitor the investment ceiling on a daily basis.