Stock market regulator Securities and Exchange Board of India (SEBI) is working on guidelines to allow high net worth foreign nationals to invest in mutual funds in India.
SEBI is currently in discussions with the finance ministry and the Reserve Bank of India in this regard, and is expected to finalise the guidelines soon.
"It is a matter of weeks, and not months," said K N Vaidyanathan, executive director of the investment management department at SEBI.
The move follows a proposal by finance minister Pranab Mukherjee in the 2011-12 Budget.
As of now, only foreign institutional investors and sub-accounts registered with the SEBI, and non-resident Indians are allowed to invest in mutual fund schemes in India.
The Budget had proposed to liberalise the portfolio investment route by giving mutual funds direct access to foreign investors other than SEBI-registered FIIs and NRIs, but with certain riders.
The government would put a cap on the number of foreign investors and the quantum of investment in a mutual fund in order to ensure better supervision of foreign funds and prevent the new investment avenue from becoming a channel for re-routing black money.