RBI raises MFs’ foreign investment cap to $7 bn
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Mutual funds will be able to invest more abroad. The Reserve Bank today facilitated increased outflow of funds by raising the overseas investment limit for mutual funds by $2 billion to $7 billion. The RBI move will give more flexibility to mutual funds in their overseas investments. "The aggregate ceiling for overseas investment by mutual funds registered with the Securities and Exchange Board of India (Sebi) has been enhanced from $5 billion to $7 billion with immediate effect," the apex bank said in a notification. In order to encourage overseas investments, the RBI had in September 2007 raised the investment ceiling for mutual funds to $5 billion from $4 billion.
However, mutual funds had invested only around $1 billion last year well within the ceiling. "The hike in ceiling seems to be aimed at encouraging outflow of funds," said a market source. The RBI has been trying to increase overseas investments to prevent appreciation of rupee and contain rising forex reserves, which have increased to more than $300 billion.