According to a source close to development, this would be permitted as part of the permissible category of investments under the $1,00,000 window available for remittance.
The RBI is finalising the list of permissible instruments for individuals under the remittance window.
However, there would be margin requirements prescribed investing in such instruments. Since the margin requirements (deposits to be kept with banks as collateral for undertaking such trades) would have to be prescribed through banks, such a bank may prescribe client-wise limit and a total cap on such lending.
These positions could be taken by individuals on international exchanges such as the New York Mercantile Exchange through the foreign branches or offices of banks in India.
Similarly, mutual funds would also be allowed to invest in equity derivatives on behalf of their Indian clients The rider was that these funds would have to disclose the nature of instruments in which they have taken an exposure, said sources.
Source explained that the RBI and Government were debating as to whether mutual funds would be free to invest in any kind of instrument provided they make a disclosure or there should be a negative list of instruments.
However, the consensus s was that the existing permissible category of investments needed to be widened from 4-5 instruments to 30-odd categories.
Sebi had already submitted its report on the nature of category of investment for mutual funds after receiving a feedback from the industry, said a source .
Earlier, the RBI had specified that mutual funds could only invest in instruments in those countries, which have strong monetary authorities and products are well regulated. Those were primarily deposit-related products.
Earlier, the RBI had clarified that no individuals could take speculative positions in overseas markets under the facility provided by the RBI to book forward contracts in the forex market.
Under this, positions could only be booked with specific underlying or for transactions such as remitting money for medical treatment or education of children overseas.
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