Can foreign nationals invest in Indian Mutual Funds?

  • Asked By
  • Updated On:
  • Replies:

Short Answer

Yes, foreign nationals can invest in Indian mutual funds. They can either invest by direct route, which requires them to open a demat account, or by indirect route through Unit Confirmation Receipts (UCR).

Detailed Answer

Mutual Funds are the best way to invest in India if you want good returns while taking less risk. A mutual fund may be a company or group of companies that pools money from many investors and invests the money in securities such as stocks, bonds, and short-term debt.

However, many foreign investors also want to invest in Indian mutual funds, but they are unsure about this.

Today we will see whether foreign nationals can invest in Indian mutual funds or not.

Can foreign nationals invest in Indian Mutual Funds?

Yes, foreign nationals can invest in Indian mutual funds. Previously, only SEBI-registered FIIs and NRIs were permitted to make investments in Indian mutual funds.

But after the financial reform in August 2011, the government changed the rules to permit foreign nationals to make direct investments and purchase units of Indian mutual funds as Qualified Foreign Investors (QFIs).

Also note that, some mutual fund houses are hesitant to accept mutual fund applications from US or Canada due to the compliance procedures. So, do check beforehand, if the respective AMC is accepting new applications from foreigners and NRIs.

Who are Qualified Foreign Investors (QFIs)?

Qualified Foreign Investor (QFI) is a person, organization, or group from a nation that is a member of the Financial Action Task Force (FATF) and makes portfolio investments in India.

It also includes a country that belongs to a group that is a member of FATF and resides in a nation that is a signatory to IOSCO’s MMOU or a signatory of a bilateral MOU with the Securities and Exchange Board of India (SEBI).

What are the different ways in which QFIs can invest in Mutual Funds?

1. Direct Route

For direct investment, a QFI needs to open a demat account with a SEBI registered Depository Participant (DP) and, through the DP, they can invest in Mutual Funds. A QFI is only permitted to open one demat account with any qualified DP, and they must subscribe to and redeem through that DP only.

2.Indirect Route

The indirect route will involve four parties: MFs, issuers of Unit Confirmation Receipts (UCR), a custodian registered with Sebi, and QFIs. After receiving Sebi's approval, the MF companies appoint UCR issuing agents overseas, who will act as their agents there.

What are the requirements for QFIs to have a demat account?

To open a demat account with a qualified DP. Every QFI will have to undergo the same KYC procedure on an ongoing basis as is applicable to Indian investors in the way that SEBI and RBI have outlined. The qualified DPs are required to carry out the required KYC and guarantee that the necessary requirements are met.

Foreign nationals investing in Indian Mutual Funds

Foreign investors are free to invest in Indian mutual funds as long as they are FATF members. However, a QFI is only allowed to open one demat account with a qualified DP at any given time. Additionally, that demat account should be the only place where all eligible securities are bought and sold.

Tagged With: foreign investmentmutual fundsforeign investerqfi investmentmutual fund investment
Categories: NRI Investment
Ask Your Query for FREE, Get quick answers from our FINTRAKK community!
Discussion (0)
Related FAQs
Can foreign nationals invest in Indian Stock Market?

Yes, foreign nationals are allowed to invest in the Indian stock market. Individuals can invest under the category of Qualified Foreign Investors, and Institutional investors can do so under the category of Foreign Institutional Investor (FII).

How can NRIs from the United States invest in Mutual Funds in India?

NRIs living in the United States can invest in Indian Mutual Funds, but there are some hassles that have to be overcome. You will require an NRE, NRO, or FCRN account in order to convert the foreign currency into Indian rupees, post which you can complete the KYC and begin investing in Indian Mutual Funds.

Can NRIs invest in mutual funds in India?

Yes, any NRI can invest in mutual funds in India, if they follow some certain conditions under Foreign Exchange Management Act or FEMA Act 1999.

How to get exposure in U.S stocks?

Investing in abroad markets has become quite easy these days. One can get direct and indirect exposure into the U.S. market through various methods. Investing in foreign markets like the U.S provides many benefits like Diversification into the top companies of the world, Benefit of Currency Depreciation, etc. Apart from directly purchasing the stocks listed on the U.S. stock exchanges, there are some different methods as well. Know the best methods of getting exposure to the U.S. stock markets.

Can NRI invest in Mutual Funds in Zerodha?

Yes , NRI can invest in Mutual Funds in Zerodha by opening a non-PIS account. However, there are restrictions for NRI investors with PIS accounts, as well as investors based in the US and Canada; they are not permitted to invest in mutual funds in Zerodha.

What is the role of FII and DII in the Indian Share market

FII and DII are two influential participants in the Indian share market. FII are foreign investors who are not located in India whereas DII constitute domestic investors who are housed within India. These investors consist of Mutual Funds, Pension Funds, and other investors who determine the direction of the Indian stock market in the short term.

Who is the Mutual Fund Regulator in India?

Mutual funds are regulated by SEBI ( Securities and Exchange Board of India). SEBI regulates mutual funds as 1996 Mutual fund regulation. SEBI is also the regulator for wider capital and securities market in India. SEBI was formed in 1988 as a statutory body and drives it powers from SEBI act 1992.

Can OCI invest in Indian Mutual Funds?

Yes, Overseas Citizens of India (OCI) can invest in Indian mutual funds. Checkout ways how an OCI can start investing in the Indian mutual fund industry.

What is Karvy KRA, KYC, FATCA Status?

KRA is an abbreviated short form of KYC Registration Agency whose primary job is to collect and maintain KYC records of individuals on behalf of SEBI registered financial market participants mainly Mutual Funds companies, NBFC, Brokers etc.

What are the tax implications on investments done outside of India?

Every Equity Investor should maintain some part of their portfolio diversified into foreign companies. This can be achieved through Foreign brokers or Mutual Funds and ETFs that invest in abroad markets. Investing abroad has many benefits such as exposure to the top global companies like Facebook, Amazon, Ford, etc. The tax implications on investments made outside India are different as foreign Equity is taxed as Debt Mutual Funds