Mutual funds set to get $10bn

Foreign individual investors can now invest up to $10 billion in domestic mutual funds. “A new class of investors called qualified foreign investors (QFIs), other than foreign institutional investors (FIIs), can invest money into domestic mutual funds,” said Thomas Mathews, joint secretary (capital markets) in the finance ministry. Qualified foreign investors can be individuals and bodies, including pension funds, and cumulatively they can invest up to $10 billion (about Rs 45,000 crore). “We are open to the idea (of increasing the $10-billion limit) if such inflows are less volatile. We will review it (the cap) after six months,” said Mathews. Till now, only foreign institutional investors and non-resident Indians were allowed to invest directly in local equity schemes. Foreign individuals could not directly put in their money. In Budget 2011-12, finance minister Pranab Mukherjee had allowed mutual funds registered with the Securities and Exchange Board of India (Sebi) to accept subscriptions from foreign investors in equity schemes that meet regulatory requirements. “This will enable Indian mutual funds to have direct access to foreign investors and widen the class of foreign investors in the Indian equity market,” the finance minister had said. The fund houses, however, will have to comply with know-your-customer (KYC) norms before seeking investment from overseas investors. Industry experts said the move was aimed at broad-basing the flow of foreign investment in the domestic stock market, reducing the dependence on FII funds. “Sebi will be the market regulator for all such investments,” said Mathews. According to the new proposal, individual foreign investors will be able to buy mutual funds in India through depositories already functioning in their countries or by opening an account with Indian depositories.