RBI eases norms for MF investments abroad

In a major boost to the domestic mutual fund industry, the Reserve Bank of India (RBI) today eased norms for their overseas investments by allowing them to invest in international mutual funds that make nominal exposures to unlisted overseas securities, overseas exchange traded funds that invest in securities and ADRs/GDRs of foreign companies.

Industry experts say the move will allow international fund houses registered in India such as Fidelity, to market their international products to Indian investors.

The new guideline would also allow Indian investors to participate in big international initial public offerings (IPO) such as the recently-concluded $12 billion IPO by China's Industrial and Commercial Bank of China (ICBC).

Currently, Indian mutual funds are allowed to invest only in ADR/GDRs of Indian companies, rated debt instruments and also equity of overseas companies listed on recognised stock exchanges.

Recently, the Reserve Bank had hiked the total investment limit for such investments to $4 billion. The individual cap per fund house for international investment is $200 million.

Foreign fund houses such as Franklin Templeton, JP Morgan, Fidelity, UBS, BNP Paribas have presence in India and could tap local investors to buy their international products, said an industry analyst.

Fund houses such as PNB Principal, Fidelity, Franklin Templeton have already launched products that invest in international securities.