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MFs can invest 4 pc of assets in foreign papers -- SEBI fixes individual limit at $50 m

K.R. Srivats

Indian mutual funds have also been allowed to invest in the units/securities issued by overseas mutual funds or unit trusts, which invest in securities that have the highest rating.

NEW DELHI, April 7

THE Securities and Exchange Board of India (SEBI) has now said that each Indian mutual fund can invest up to four per cent of its net assets as on February 28, 2002 in rated securities in countries with fully convertible currencies and in American depository receipts (ADRs)/global depository receipts (GDRs) issued by Indian companies in overseas markets.

In addition to the four per cent norm, a maximum investment limit of $50 million has also been placed on each Indian mutual fund for investment in rated foreign securities and ADRs/GDRs issued by Indian companies. Currently, an upper limit of $500 million is applicable for the entire mutual fund industry for making investments in ADRs/GDRs issued by Indian companies and in rated foreign securities.

While the Indian mutual funds were already permitted to invest in ADRs/GDRs issued by Indian companies in overseas markets, the Finance Minister, Mr Yashwant Sinha, had in his Budget speech for 2002-03 said that the country's mutual funds would be allowed to invest in rated securities in countries with fully convertible currencies, within the existing limits.

A senior SEBI official said that Indian mutual funds could now make investments in foreign debt securities in countries with fully convertible currencies, short-term as well as long-term debt instruments with highest rating (foreign currency credit rating) by accredited/registered credit rating agencies like S & P, Moody's or by Fitch IBCA.

Indian mutual funds have also been permitted to invest in Government securities where the countries are AAA rated, the official said.

Further, Indian mutual funds have also been allowed to invest in the units/securities issued by overseas mutual funds or unit trusts, which invest in securities that have the highest rating from registered credit rating agencies and are registered with overseas regulators. Existing mutual fund schemes or new schemes launched for this purpose can make the investments in foreign securities.

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