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Investment limit raised for MFs

MUMBAI: The Securities and Exchange Board of India on Wednesday raised the investment limit per mutual fund to $300 million from $200 million and enhanced the limit for overseas investments by mutual funds to $5 billion, as already announced by the Reserve Bank of India on Tuesday. The regulator also added new categories of overseas investments by mutual funds.

“In order to facilitate overseas investments by mutual funds in line with the announcement in the Union budget 2007-08, SEBI has increased the limit for overseas investment by each mutual fund.

Further the sub-ceiling linked to the net assets of a mutual fund as on March 31 of each year has been dispensed with,” SEBI stated in a press release. Further, the requirement of existence for ten years or experience of investing in foreign securities for being eligible to invest in overseas exchange traded funds (ETFs) has been dispensed with.

Mutual funds can now invest in new categories of overseas instruments: ADRs or GDRs issued by foreign companies; initial and follow-on public offerings for listing at recognised stock exchanges overseas; foreign debt securities in the countries with fully convertible currencies, with rating not below investment grade; money market instruments rated not below investment grade; repos-only as pure investment avenues where the counterparty is rated not below investment grade; repos should not however, involve any borrowing of funds by mutual funds; government securities where the countries are rated not below investment grade; derivatives traded on recognised stock exchanges overseas only for hedging and portfolio balancing with underlying as securities; short term deposits with banks overseas where the issuer is rated not below investment grade; units and securities issued by overseas mutual funds registered with overseas regulators.

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