AMFI To Push For Review Of $7 Billion Overseas Mutual Fund Investment Cap

India's mutual fund industry body is gearing up to renew its case for raising the overseas investment limit, with Association of Mutual Funds in India (AMFI) planning to approach the Reserve Bank of India (RBI), Securities and Exchange Board of India (SEBI) and the government once the current Foreign Currency Non-Resident (Bank) (FCNR(B)) deposit mobilisation window closes.

The $7 billion cumulative cap on overseas mutual fund investments has been in place for over a decade and has not been revised despite significant changes in global markets and India's foreign exchange position.

Why The Cap Has Become A Problem

The limit has effectively frozen Indian mutual fund investors out of some of the strongest global market rallies in recent years. Several fund houses hit their individual allocation ceilings months ago and have since stopped accepting fresh money into international schemes. The AI-driven surges in Taiwan and South Korea and sustained gains in the US market, passed largely out of reach for investors who could only access them through mutual funds.

The $7 billion cap applies to direct overseas equity investments by mutual funds, while a separate $1 billion ceiling covers overseas ETFs. Both figures have remained unchanged for years.

The Rationale Behind AMFI's Fresh Proposal

The timing of the fresh push is deliberate. The rupee has stabilised after a sharp fall earlier this year, and government and RBI measures have been aimed at boosting forex inflows. The FCNR(B) deposit window, which could attract an estimated $30 to $50 billion in foreign currency inflows, according to analysts, would significantly strengthen India's reserve position and remove one of the key arguments against relaxing overseas investment limits.

AMFI's chief executive has also drawn a clear distinction between mutual fund overseas investments and direct remittances under the Liberalised Remittance Scheme, which allows individuals to send up to $250,000 abroad annually. Money sent through LRS may not return to India, whereas international mutual fund redemptions flow directly back into investors' domestic accounts. This repatriation mechanism, AMFI argues, makes mutual fund-based global investing a far lower risk to India's capital account than direct remittances.

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Other Developments

On equity fund inflows, AMFI has played down the 40% month-on-month drop in May to ₹22,908 crore from ₹38,440 crore in April, attributing the slowdown to temporary investor caution during volatile markets. India's mutual fund AUM stood at ₹81.58 lakh crore at the end of May 2026.

Despite that scale, a 2025 SEBI survey found only 6.7% of Indian households actually invest in mutual funds, pointing to significant room for growth that AMFI is addressing through awareness programmes in states including Odisha, Bihar, Andhra Pradesh and Meghalaya.

Sources:

Mint

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