Securities & Exchange Board of India (Sebi), on Wednesday, increased the limit for overseas investment by each mutual fund from US$200 million to US$300 million.

This subject to overall limit for overseas investments by mutual funds up to US$5 billion already announced by Reserve Bank of India, on Tuesday, Sebi said here.  

Further, sub-ceiling linked to net assets of a mutual fund as on March 31 of each year has been dispensed with. Also, the requirement of existence for 10 years or experience of investing in foreign securities for being eligible to invest in overseas Exchange Traded Funds has been dispensed with.

MFs can now invest in ADRs/GDRs issued by foreign companies, both initial and follow on public offerings for listing at recognised stock exchanges overseas.

Rider on repos
They are also allowed to invest in foreign debt securities in countries with fully convertible currencies, but Sebi said strict ‘no’ to money market instruments rated not below investment grade.  

While allowing investments in repos, Sebi makes it clear that they should be only as pure investment avenues where counter-party is   rated not below investment grade.  Repos should not, however, involve any borrowing of funds by MFs.

It allows investment in units or securities issued by overseas mutual funds registered with overseas regulators and investing in approved securities or Real Estate Investment Trusts listed in recognised stock exchanges overseas or unlisted overseas securities (not exceeding 10 per cent of their net assets).

It bars investment in government securities where countries are rated not below investment grade such as derivatives traded on recognised exchanges overseas only for hedging and portfolio balancing, short term deposits with banks overseas where the issuer is rated not below investment grade.