Why has AMFI asked mutual funds to stop inflows into international schemes?

AMFI has recently asked mutual fund AMCs to stop inflows into specific schemes with international mandates. In addition, effective from 01st February 2022, these mutual funds can only reduce their stake in these funds. It may be recollected that Motilal Oswal Mutual Fund has already stopped fresh inflows into its international mandated funds, even before this stricture was issued by SEBI. This has to do with the limits imposed.

The reason is that the overseas limit that Indian mutual funds are permitted to invest in assets abroad is only up to $7 billion or approximately Rs.53,000 crore. That limit has already been breached by the Indian mutual funds. Normally, such limits are automatically enhanced but this time around, there was a breach of the limit so fresh inflows have been put on hold till the limit is enhanced. Also, NFOs will not be approved for such funds.