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Business News/ News / Overseas investing limits for mutual funds will depend on rupee’s stability: Das
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Overseas investing limits for mutual funds will depend on rupee’s stability: Das

RBI governor Shaktikanta Das said the regular will consider the mutual fund industry’s request for higher limits when there is confidence that the rupee’s stability will continue

RBI governor Shaktikanta Das at the Mint Annual BFSI Summit and Awards in Mumbai on 11 January, 2024. (Mint)Premium
RBI governor Shaktikanta Das at the Mint Annual BFSI Summit and Awards in Mumbai on 11 January, 2024. (Mint)

MUMBAI : Reserve Bank of India governor Shaktikanta Das said the central bank is waiting for the right time to increase the overseas investment limit for domestic mutual funds, which is currently capped at $7 billion for the entire industry.

The RBI governor said although the rupee has stabilized after it was under pressure at the start of the Russia-Ukraine war, RBI is still waiting for the right time to revise the overseas investment limit for mutual funds.

“This request has been coming from the MF industry from time to time," the governor said at the 16th edition of the Mint Annual BFSI Summit and Awards. “We will take a call at the right time when we feel confident that the rupee is stable on a durable basis"

To be sure, mutual fund companies were directed to stop investing fresh money overseas from 2 February 2022 mainly on account of the industry limit of $7 billion getting exhausted. 

Within that limit, each asset management company can invest up to $1 billion in foreign securities. This limit had been raised from $600 billion in 2021, although the overall industry limit of $7 billion remains unchanged since 2008.

A mutual fund manager said on condition of anonymity that when the overseas investment limit was breached, the Indian currency was under pressure due to geopolitical factors like the Russia-Ukraine war and global interest rate hikes. But the environment has stabilized now and the industry expects the overseas investment limit to be raised soon.

An important factor that led to the overseas limit being exhausted was the heightened interest of domestic investors to participate in US markets on the back of a rally in US tech stocks right after the covid lows. 

This led to investors flocking into exchange-traded funds and funds tracking the US indices and other foreign stocks, contributing to the overall industry limit on overseas investments getting exhausted.

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ABOUT THE AUTHOR
Sashind Ningthoukhongjam
Sashind writes on personal finance, mutual funds, and all things money. He is a regular host of the 'Why Not Mint Money?' podcast.
Catch all the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
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Published: 11 Jan 2024, 07:11 PM IST
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