Mutual funds may get to invest $7 Bn abroad

By SiliconIndia   |   Saturday, 29 December 2007, 04:27 Hrs
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Kolkata: The mutual funds may feel freer in terms of their overseas investments in 2008. They are likely to be allowed to invest up to $7 billion collectively in overseas markets, which is a 40 percent jump over the present ceiling of $5 billion. The present ceiling has been raised from $4 billion just about three months back, reported The Economic Times.

Both financial regulators - Reserve Bank of India (RBI) and Securities & Exchange Board of India (SEBI) - have in principal agreed to the proposal to enhance the overseas investment ceiling further. According to top industry sources, the papers are waiting for final clearance from the government.

With this, the individual investment ceiling will also be raised from the current limit of $300 million. Apart from allowing the fund houses to deepen their investment basket, the proposed move will facilitate a higher capital outflow, which would ease the pressure on RBI in managing the dollar deluge.

Mutual funds can invest in American and global depository receipts, equity of overseas companies, foreign debt securities in the countries with fully convertible currencies and money market instruments rated not below investment grade.

When contacted, SEBI officials declined to comment on the issue. Mutual fund circles close to the development, however, said SEBI had written sometime in November to the central bank seeking permission to raise total overseas investment by all mutual funds by $2 billion to $7 billion.

Association of Mutual Funds in India (AMFI) chairman AP Kurian said: "So far, some five to seven fund houses have launched special schemes for investment in overseas securities. The total mop-up by these funds is yet to reach anywhere near the present $5 billion cap."

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