'Limit on overseas investment by individual MFs to go'

NEW DELHI: A day after the RBI relaxed overseas investment norms to arrest the rising rupee, a senior government official on Wednesday said the cap on overseas investment by individual mutual funds will soon be lifted.

Currently, individual mutual funds can invest 200 million dollars or 10 per cent of its assets under management overseas, whichever is higher.

"This cap would be done away with. The government and the RBI have agreed to remove the limit," the Finance Ministry official said.

Market regulator SEBI may issue an order removing the limit in two to three days, the official said.

On Tuesday, the Reserve Bank raised the overseas investment limit by mutual funds to five billion dollars from four billion dollars earlier.

Sources said as even four billion dollar limit is not exhausted, there was no rationale in keeping the cap on individual mutual funds.

Dhirendra Kumar of mutual fund tracking company Value Research said no fund house has so far hit the limit of 200 million dollars. However, the restriction could come in the way of the overall limit of five billion dollars as some funds would like to invest beyond 200 million dollars but others may not be interested in overseas investment at all, he said.

Kumar also demanded that the limit of one billion dollars on exchange traded fund should also be lifted as no company has gone for that route so far.