The Association of Mutual Funds in India (AMFI) is preparing a fresh appeal to the Reserve Bank of India (RBI) to raise the overseas investment limit for mutual funds, currently capped at $7 billion (aggregate industry limit) set in 2022. Individual fund houses are restricted to $1 billion each. AMFI argues the freeze is stifling global diversification for Indian investors. The overall limit, including ETFs, stands at $7 billion plus $1 billion for overseas ETFs.

India's mutual fund industry manages over ₹60 lakh crore in assets, yet its overseas exposure remains frozen at limits set years ago — $7 billion aggregate for active funds and $1 billion for overseas ETFs, totalling $8 billion. SEBI and RBI jointly govern this space: SEBI sets fund-level rules while RBI controls forex outflows under FEMA. The $7 billion cap was effectively frozen in February 2022 when utilisation hit the ceiling, forcing AMCs to halt fresh subscriptions in international funds.

The freeze has real investor consequences: Indian mutual fund investors cannot add fresh money to US equity funds, global tech funds, or international FOFs. This limits portfolio diversification against rupee depreciation and domestic market cycles. AMFI's argument is structural — India's AUM has roughly doubled since the freeze, making the $7 billion limit proportionally much smaller today.

For RBI Grade B candidates, the key tension here is between capital account liberalisation and macroeconomic stability. RBI is cautious because large outflows can pressure the rupee, especially during current account deficit periods. The Liberalised Remittance Scheme (LRS) at $250,000 per individual per year runs parallel. AMFI's push reflects the broader debate between financial deepening (global asset access) and external sector management — a classic ESI-FM intersection topic for RBI Grade B.