As $1b limit nears, MFs told to suspend overseas ETF inflows

India’s capital markets regulator has ordered local mutual fund managers to stop accepting money in plans that invest in overseas exchange traded funds (ETFs) as a $1-billion cumulative sectoral limit for such investments is close to being breached.

RBI regulates the fund inflows and outflows involving locally pooled investments in overseas financial assets. Currently, there is an overall industry level limit of $7 billion for investments into overseas mutual funds, and an additional $1-billion limit for foreign ETFs.

Sebi has asked the Association of Mutual Funds in India (AMFI) to direct fund houses to stop accepting money in the relevant ETF-focused plans.

From April 1, these fund managers will not accept lumpsum money in these plans, while existing systematic investment plans will be paused. Fund houses can continue to accept money in plans that invest in overseas securities other than ETFs, which have a separate limit of $7 billion.