Funds investing in Gift City may enjoy special carve-out

Mutual funds may get to invest in companies traded in Gujarat's Gift City exchanges beyond the normal cap that applies for their overseas investments. The move comes at a time the government is opening up the special economic zone for direct listing of Indian firms.

- Pavan Burugula

A 16-member expert panel appointed by the International Financial Services Centres Authority (IFSCA) last week recommended a special carveout for mutual funds wanting to invest in Gift City. Mint has seen a copy of the report.

Currently, any investments made by mutual funds are considered overseas investments, which are subject to various investment limits.

The Reserve Bank of India (RBI) allows the entire mutual funds industry to invest up to $7 billion in overseas companies. Also, no individual fund is allowed to invest more than $1 billion in foreign securities. The expert committee recommendation, if implemented, will ensure that their investments in Indian companies in Gift City are not considered and, overseas investment instead, a separate limit will be put in place for Gift City.

To be sure, Gift City currently offers only derivatives trading, and does not have any listed companies. The government is working to allow Indian firms to list directly from Gift City, before opening up direct overseas listings.