The (AMFI) is set to renew its demand for raising the overseas investment limit for mutual funds, arguing that the decade-old cap has become a constraint for investors seeking global diversification, according to a report by Business Today.
AMFI chief executive Venkat Chalasani told Business Today that the industry would once again approach the Reserve Bank of India (RBI), the government and the Securities and Exchange Board of India (Sebi) after the ongoing FCNR(B) deposit mobilisation window concludes.
“We are taking it up on a regular basis with the RBI, Government of India and Sebi, requesting them that this particular cap needs to be increased to enable investors to diversify their investments,” Chalasani said, as quoted by Business Today.
Why the overseas investment cap matters
Indian mutual funds are currently allowed to invest a cumulative $7 billion in overseas securities, while overseas exchange-traded funds (ETFs) are subject to a separate $1 billion limit. The ceiling has remained unchanged for more than a decade.
Several fund houses have either stopped accepting fresh investments or restricted inflows into international schemes after the industry-wide limit was exhausted.
The issue has gained prominence after global equity markets, particularly in the US and parts of Asia, posted strong gains over the past year, driven by enthusiasm around artificial intelligence-related stocks. The investment restrictions meant many Indian mutual fund investors could not fully participate in these rallies.
According to the Business Today report, AMFI believes the recent stabilisation of the rupee and measures aimed at boosting foreign exchange inflows provide an opportunity for policymakers to reconsider the cap.
AMFI draws distinction between mutual funds and LRS
While Indian residents can invest overseas through the Liberalised Remittance Scheme (LRS), which allows remittances of up to $250,000 a year, AMFI argues that mutual fund investments should be treated differently.
Chalasani said money remitted under LRS may remain outside India, whereas investments made through international mutual fund schemes are eventually redeemed back into the country.
He also noted that receive investments from non-resident Indians (NRIs), strengthening the case for a higher overseas investment limit.
According to Business Today, AMFI has consistently maintained that overseas mutual fund investments do not pose the same long-term foreign exchange concerns as direct remittances under LRS.
AMFI unfazed by moderation in equity mutual fund inflows
Chalasani also played down concerns over the sharp decline in equity mutual fund inflows in May.
According to AMFI data, net inflows into equity mutual funds fell 40% month-on-month to ₹22,908 crore in May from ₹38,440 crore in April, amid heightened market volatility following geopolitical tensions in West Asia.
He attributed the slowdown to investor caution during periods of uncertainty, saying it is natural for investors to temporarily hold back investments when markets become volatile.
Despite near-term risks such as geopolitical tensions, crude oil prices, inflation and foreign institutional investor (FII) flows, Chalasani said India’s economic fundamentals remain supportive.
AMFI eyes broader retail participation
Beyond policy reforms, AMFI is also focusing on expanding mutual fund penetration.
The industry body’s efforts include investor awareness programmes in states such as Odisha, Bihar, Andhra Pradesh and Meghalaya, regional-language campaigns, outreach through schools, and engagement with gig workers and self-help groups, according to Business Today.
The push comes even as India’s mutual fund industry continues to grow. Assets under management stood at ₹81.58 lakh crore at the end of May 2026. However, a Sebi investor survey conducted in 2025 found that while more than half of respondents were aware of mutual funds or ETFs, only 6.7% of households actually invested in them, highlighting the significant scope for further expansion.