SEBI directs Mutual Funds to halt inflows into overseas ETFs

SEBI has issued a directive to the Association of Mutual Funds of India, urging a halt in accepting inflows into funds investing in overseas Exchange-Traded Funds starting from April 1.

This development comes in response to the imminent breach of the upper limit set for investments in overseas ETFs, which currently stands at $1 billion. SEBI's intervention follows closely after the mutual fund industry previously exhausted its $7 billion limit allocated for investments in overseas stocks and funds. Consequently, overseas mutual funds ceased accepting further inflows.

The regulatory move underscores the need to maintain prudence in managing overseas investments within the stipulated limits. With the current limit for ETF investments nearing exhaustion, SEBI's intervention aims to prevent overextension beyond permissible thresholds.

Since January 2022, when the $7 billion limit for overseas securities was reached, SEBI had already instructed fund houses to halt investments abroad. Now, with the ETF limit close to being breached, SEBI's recent directive reinforces the importance of adhering to regulatory boundaries.

A letter dated March 20, reviewed by Moneycontrol, reveals SEBI's communication to AMFI, signaling the urgency of the situation. The regulatory authority's proactive stance seeks to ensure the stability and sustainability of the mutual fund industry amidst evolving market dynamics.

As India's mutual fund landscape continues to evolve, regulatory measures such as these play a crucial role in safeguarding investor interests and maintaining market integrity. SEBI's directive underscores the importance of compliance and prudence in managing overseas investments, reflecting its commitment to fostering a robust and transparent financial ecosystem.

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