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The Reserve Bank of India (RBI) has increased its offshore investing capacity by doubling the amount individuals can place overseas.
Investors can now place $100,000 (£50,000) overseas on an annual basis, while the quota for the domestic funds industry to invest abroad has been raised from $3 billion to $4 billion.
The changes will have a liberalising effect on Indias $76 billion mutual finds industry and offshore banking .
Only last year India gave fund managers the ability to invest overseas for the first time.
Mukul Gupta, CEO at Birla Sun Life Asset Management in Mumbai said, according to the Asian Investor: "Demand exists for offshore investments but only a few fund houses have products.
"The potential is enormous. This is just the tip of the iceberg," he added.
The central bank is said to be concerned about the inflow of foreign reserves and an appreciating rupee.
Offshore company formation is set to rise and fund executives in Mumbai are expecting the rupee to become fully convertible within the next five years or so.
Currently the exchange rate stands at 82 rupees to the pound.
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