Industry experts urge RBI to raise cap as forex reserves hit nearly $700 billion
India’s mutual fund industry has once again called for an increase in the overseas investment limit, urging regulatory authorities to reconsider the current cap of $7 billion for industry-wide investments in foreign securities.
At present, the Reserve Bank of India (RBI) allows a maximum of $1 billion per mutual fund house, and an additional $1 billion for investments in overseas exchange-traded funds (ETFs). However, these limits were breached in 2022 and have not been revised since, causing a roadblock for mutual funds looking to diversify globally.
Rising SIP Inflows Fuel the Demand
Speaking at the Moneycontrol Mutual Fund Summit 2025, Kalpen Parekh, MD & CEO of DSP Mutual Fund, emphasized the importance of international diversification for investors.
“The global space is useful for investor outcomes, but right now the limits are shut,” said Parekh, highlighting the constraint fund houses face.
He also noted that with the increasing inflows via Systematic Investment Plans (SIPs), a raised overseas limit would act as a pressure buffer, helping fund managers deploy capital more efficiently.
Strong Forex Reserves Make a Case for Relaxation
Industry insiders believe that increasing the limit should not be an issue, considering the RBI’s robust forex reserves of $698.8 billion as per the latest data.
Despite repeated representations to both SEBI and the RBI, the limits have remained unchanged, restricting the ability of asset management companies (AMCs) to launch new international schemes or invest globally through existing funds.
Global Exposure Remains Limited
Currently, only 22 mutual fund schemes in India have partial exposure to global equities. Due to the cap, new fund offers (NFOs) with overseas investment mandates remain inactive in terms of global allocation, missing out on valuable diversification benefits for investors.
Global investments help Indian investors hedge against domestic volatility and offer exposure to international tech giants, commodity-linked stocks, and emerging themes across geographies. But due to regulatory constraints, mutual funds are unable to fully tap into this opportunity.
Industry Seeks Policy Action
With continued strong SIP momentum and investor interest in diversified portfolios, the mutual fund industry is now renewing its appeal to the RBI and SEBI to raise the overseas investment cap- enabling better asset allocation, improved returns, and increased global participation.
Source: Moneycontrol