The Association of Mutual Funds in India (AMFI) is making a strong push to change a decade-old rule. AMFI, which is the trade body for all Asset Management Companies (AMCs) in India, wants the Reserve Bank of India (RBI) and SEBI to increase the limit for overseas investments. Currently, the entire mutual fund industry is only allowed to invest a total of $7 billion in foreign shares. There is also a separate $1 billion limit for overseas Exchange-Traded Funds (ETFs) (funds that trade on stock exchanges like shares).

These limits were set a long time ago and have not been updated. Because the industry has already hit this $7 billion ceiling, many mutual fund houses have been forced to stop taking new money from investors for their international schemes. This means if an Indian investor wants to buy a fund that invests in US tech stocks or global markets, they often find the doors closed.

Venkat Chalasani, the Chief Executive of AMFI, stated that the industry is regularly talking to the RBI and the government about this issue. He explained that raising the cap will help Indian investors diversify (spread out) their risks by investing in different countries. AMFI plans to renew this demand formally after the current FCNR(B) deposit window ends. FCNR(B) stands for Foreign Currency Non-Resident (Bank) accounts, which are used to bring foreign currency into India.

In recent years, global markets—especially in the US and parts of Asia—have performed very because of the boom in Artificial Intelligence (AI). However, because of the $7 billion cap, many Indian investors missed out on these profits. AMFI argues that now is the right time to hike the limit because the Indian Rupee has become stable and India has healthy foreign exchange reserves.

AMFI also pointed out a key difference between direct foreign investing and mutual funds. Under the Liberalised Remittance Scheme (LRS), an individual can send up to $250,000 abroad every year. AMFI argues that money sent through LRS might stay outside the country forever. However, money invested through Indian Mutual Funds always comes back to India when the investor sells their units (redemption). Furthermore, since many Non-Resident Indians (NRIs) also invest in Indian funds, it helps the country's foreign exchange position.

Apart from the policy push, AMFI addressed the recent 40% drop in equity fund inflows. In May, net inflows fell to ₹22,908 crore compared to over ₹38,000 crore in April. Chalasani explained that this happened because of global tensions and market volatility (fast price changes). He said it is natural for investors to be cautious during uncertain times. Despite this, the Indian mutual fund industry continues to grow at a massive pace. The total Assets Under Management (AUM) reached ₹81.58 lakh crore by May 2024.

AMFI is now focusing on bringing mutual funds to small towns and rural areas. They are running awareness campaigns in states like Odisha, Bihar, and Meghalaya. Even though the industry is huge, a SEBI survey showed that only 6.7% of Indian households actually invest in mutual funds. This shows there is a huge opportunity for bank officers and MF players to grow the business in the coming years.