NRIs account for 4% of MF industry’s AUM

NRIs are increasingly taking part in India’s growth story through mutual fund route.

NRIs Investments in Indian mutual funds now account for nearly 4% of the industry’s total AUM, shows the RBI’s ‘Survey of Foreign Liabilities and Assets of Mutual Fund Companies’ for FY 2018-19.

Of the total AUM of Rs.25.50 lakh crore, NRIs’ investments accounted for Rs.93,500 crore as on March 2019. The value of NRIs’ investments in Indian MF industry was Rs.86,000 crore a year ago.

Among NRIs, the UAE (16%), the UK (9.6%) and the USA (8.3%) were the largest investors in the Indian MF industry. These three regions account for one-third of the MF units held by all NRIs.

While NRIs from most countries increased their investment in Indian MFs, units held by non-residents of Mauritius and Singapore declined. This was following the amendment of Double Taxation Avoidance Agreement (DTAA) with these countries, the central bank survey said.

Table - Foreign Liabilities in Units of MF Companies at Market Value – Major Countries

Cumbersome compliance

To put this NRIs’ investment number into context, not all of the 44 Indian MF companies accept investment from NRIs. In fact, only around 8-10 fund houses accept investments from NRIs residing in the US and Canada. This is because of the cumbersome compliance requirements under Foreign Account Tax Compliance Act (FATCA).

Under FATCA, it is compulsory for all financial institutions to share the details of transactions involving US citizens, including NRIs with the US Government.

Moreover, even among the fund houses that allow NRIs to invest in their schemes, there are some restricting conditions. While some fund houses allow investments only through offline transaction with additional declaration signed by the client, a few fund houses allow clients from US and Canada to invest in close-ended funds.