AMFI Reiterates Need To Relook Mutual Funds’ $7 Billion Overseas Investment Limit

The first six months of 2026 have been tumultuous for India’s capital market. With benchmarks like the Nifty 50 delivering negative year-to-date returns of nearly 8 per cent and facing bouts of harsh volatility, investors are increasingly looking at opportunities to hedge their bets on India by investing overseas.

Mutual funds can provide a safe, accessible route for local investors to participate in global equities. However, domestic fund houses remain limited in their ability to offer such options due to a cap on global investments for mutual fund houses.

According to a report by Business Today, the Association of Mutual Funds in India (Amfi) is set to make a fresh appeal to the Reserve Bank of India (RBI), the government, and the Securities and Exchange Board of India (Sebi) to re-examine the mutual fund industry's aggregate overseas investment limit. The report cited Venkat Chalasani, CEO of Amfi, who mentioned that while the association has regularly made requests for raising the cap, it will make fresh requests amid changing market dynamics.

What Is The Cap on Overseas Mutual Fund Investments

Presently, the mutual fund industry is bound by a cumulative cap of USD 7 billion for mutual funds investing directly in international equities and a separate USD 1 billion cap on Exchange-Traded Funds focused on global markets. Notably, these limits were introduced by the RBI to shield the rupee from aggressive capital flight during periods of high current account deficits.

As many international schemes hit these individual allocation ceilings months ago, several fund houses have had to restrict or halt fresh inflows into their global schemes. On the other hand, mutual fund investors have largely missed out on massive global market rallies, including the recent artificial intelligence boom seen in the Taiwanese and South Korean markets.

Why Is Amfi Pushing For Higher Limits Now

The mutual fund industry’s renewed push for revising the caps comes at a time when the rupee has stabilised against the US dollar after witnessing a sharp fall earlier this year. Recent government-led and RBI measures have attempted to shore up foreign exchange inflows.

Another key reason behind the demand for higher investments is the RBI’s special window allowing commercial banks to raise Foreign Currency Non-Resident (Bank) deposits with maturities of three to five years.

Analysts estimate this window could attract between USD 30 billion and USD 50 billion or more in foreign currency inflows, significantly bolstering India’s forex reserves and removing the primary macroeconomic barrier to relaxing overseas investment limits.

Chalasani also advocated for the relaxation, drawing a sharp operational distinction between mutual funds and alternative international investing channels.

While investments can be made in global stocks via the RBI’s Liberalised Remittance Scheme (LRS), which allows individuals to remit up to USD 250,000 dollars per financial year, or use outbound funds through the GIFT City International Financial Services Centre, these methods are relatively more complex compared to investing in a mutual fund scheme or ETF which invests in foreign equities.

According to the report, Chalasani also highlighted a macroeconomic advantage unique to the mutual fund route, which is capital repatriation. He noted that in the case of LRS, the money goes, and it may not come back. However, if a retail investor is investing in a mutual fund, it is 100 per cent going to come back into the country as international mutual fund schemes mandate that all redemptions flow directly back into the investor’s domestic bank account.

Amfi argues that this loop presents far less risk to India’s long-term capital account balance than direct foreign remittances, making it a relatively safer mechanism for global portfolio diversification.