MUMBAI (Reuters) - India’s asset managers said on Tuesday the central bank’s decision to increase overseas investment limit for mutual funds to $4 billion would improve the appeal of funds investing abroad.
India now has two funds with a mandate to invest abroad and a third fund house this month opened its own offer. Half a dozen more such funds are in the offing.
In January, India allowed mutual funds to invest in American depositary receipts, global depositary receipts and foreign securities within an overall limit of $3 billion. The Reserve Bank of India now plans to raise that limit by a third.
“It is now a meaningful opportunity for fund houses,” Rajan Krishnan, business head of Principal Pnb Asset Management Co. Pvt. Ltd., told Reuters.
“It improves the scale and attractiveness of the product,” Krishnan, whose fund house launched country’s first overseas investment fund said. “More players will look forward to getting into this space now.”
Sanjay Santhanam, vice president, BNP Paribas Asset Management Co. Ltd., called the central bank decision “a great thing.”
“It’s good enough for the time being,” Santhanam, whose fund house is planning to launch a fund to invest in overseas funds, said. He pointed out Indian funds were yet to exhaust even the existing limit.
At present, individual mutual fund houses can invest in these securities up to 10 percent of their assets under management as on March 31 of the relevant year, subject to a maximum of $150 million.
“The RBI would probably have a plan to progressively keep reviewing this limit based on how it is being exhausted,” Santhanam added.
