RBI allows MFs to invest overseas

Mumbai: In a major boost to the domestic mutual funds, the Reserve Bank of India (RBI) June 7, permitted them to infuse in international mutual funds that take nominal exposures to unlisted overseas securities and in overseas exchange-traded funds that invest in securities and ADRs/GDRs of foreign companies. The new guidelines will also permit Indian investors to take part in big international IPOs, such as the recently-concluded $12-billion IPO of Industrial and Commercial Bank of China (ICBC).

Indian mutual funds are permitted to infse only in ADR/GDRs of Indian companies, rated debt instruments and equity of overseas companies listed on recognised stock exchanges. Recently, the Reserve Bank had increased the investment limit for such investments to $4 billion. The cap per fund house for international investment is $200 million. Foreign fund houses, such as Franklin Templeton, JP Morgan and Fidelity, which have presence in India, will now be able to tap local investors to buy their international products.