Investment in units of Domestic Mutual funds by 'Qualified Foreign Investors'
IN terms of Schedule 5 to the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000 notified vide Notification No. FEMA 20 / 2000 -RB dated May 3, 2000 as amended from time to time, a SEBI registered Foreign Institutional Investor (FII) and Non Resident Indian (NRI) may purchase, on repatriation basis, units of domestic Mutual Funds (MFs), subject to such terms and conditions mentioned therein and limits as prescribed for the same by the Reserve Bank and the Securities and Exchange Board of India (SEBI), from time to time.
In consultation with the Government and the SEBI, RBI has decided to allow non-resident investors (other than SEBI registered FIIs and SEBI registered FVCIs) who meet the KYC requirements of SEBI, hereinafter called ‘Qualified Foreign Investors' (QFIs), to purchase on repatriation basis rupee denominated units of equity schemes of domestic MFs issued by SEBI registered domestic MFs in accordance with the terms and conditions as stipulated by the SEBI and the RBI from time to time in this regard.
The QFIs may invest in rupee denominated units of equity schemes of domestic MFs issued by the SEBI registered domestic MFs under the two routes, namely:
++ Direct Route – SEBI registered Depository Participant (DP) route
++ Indirect Route - Unit Confirmation Receipt (UCR) route
++ These investments would be subject to specified terms and conditions as highlighted below:
General conditions
Investments by the QFIs would be subject to a ceiling of USD 10 billion under both the routes. For the purpose of this ceiling of USD 10 billion, total amount invested for the purchase of domestic MFs units by all QFIs and the money lying in the single rupee pool bank accounts of DPs would be added. SEBI will monitor the ceiling of USD 10 billion on daily basis through the concerned domestic MFs and DPs.
Direct Route
The DP route will be operated through separate single rupee pool bank account to be maintained by the DP with a AD Category I Bank in India. The funds received from the QFIs into this account shall be remitted to the domestic MF either on the same day of the receipt of the funds from QFIs or by next business day in case money is received after business hours, failing which the funds would be immediately repatriated back to the QFI's overseas bank account.
Indirect Route
Domestic MFs would be allowed to open foreign currency accounts outside India for the limited purpose of receiving subscriptions from the QFIs as well as for redeeming the UCRs.
A.P. (DIR Series) CIRCULAR NO. 08/RBI, Dated: August 9, 2011