Banks find new ways for overseas investment
offshore funds in financial centres like Singapore. In the past one month around four ultra-high net worth individuals were allowed to remit money to foreign funds whose managers are regulated but not the fund themselves, sources told ET.
The development is being closely tracked by private wealth managers and financial experts catering to rich clients who typically park a slice of their wealth in overseas securities, art, properties and funds betting on startups and other investment themes across markets.
Such a diversified investment strategy ran into a hurdle a year ago when the Reserve Bank of India (RBI) laid down new dos and don'ts of overseas investments.
Among other restrictions, such as bringing back idle funds in six months, the regulations, which upturned investment plans of many well-heeled families, said that any investment in overseas funds must only be made in "regulated funds".
Since in many jurisdictions, funds, which are primarily pooled vehicles, are not directly regulated entities, banks, acting as authorised dealers (ADs) handling remittance of payments and foreign exchange, clamped down on several investments. Some banks are now taking a less harsh and more realistic interpretation of the central bank guidelines to approve investments in offshore funds as long as the manager of the fund — or, the asset management company — is a regulated entity.
A resident individual can invest up to $250,000 a year abroad under the RBI's liberalised remittance scheme (LRS).
Families often pool in money with each remittance under a member to acquire properties worth millions abroad.
«With the amendment in the LRS rules, idle funds cannot be retained for longer than 180 days.
