Non-resident Indians continue to be a meaningful part of the Indian mutual fund ecosystem, with the UAE, US, UK and Singapore remaining the largest sources of such investment year after year.
The Reserve Bank of India (RBI) has released the findings of its 2025-26 Survey of Foreign Liabilities and Assets of Mutual Funds, and the numbers show a mutual fund industry with a very different foreign money story compared to a year ago.
UAE, US, UK and Singapore continue to dominate non-resident holdings within the Indian mutual fund industry. The pattern of who is holding Indian MF units abroad has stayed largely consistent.
The United Arab Emirates, the United States, the United Kingdom and Singapore remained the top destinations, together accounting for around 50% share in MF units held by non-residents, both by face value and market value.
This mirrors FY25, when the same four countries held the largest shares, though the exact concentration figure was not specified in last year’s release the way it has been this year.
Investing in MFs by NRIs
Investing in a mutual fund in India requires using an NRO or NRE account with an Indian bank. NRO accounts manage income earned in India, while NRE accounts convert foreign currency earnings to Indian currency.
Asset management firms in India do not accept international currency investments. Once you start investing in a scheme with an NRE/NRO account, you must continue using that same account type for the investment, as mixed sources are not permitted at the folio level.
Even though KYC is mandatory, many mutual fund schemes in India are unavailable to NRIs from the USA and Canada because of complex compliance requirements under FATCA. Fund houses allowing NRI investments often require extra documentation and eligibility criteria.
Foreign liabilities keep rising
Foreign liabilities of mutual funds, largely units held by non-resident investors, rose 3.3% year-on-year to $31.5 billion (at market value) as of end-March 2026.
That is a marked slowdown from the previous year, when foreign liabilities had jumped 19.9% to $30.5 billion. The RBI attributed this year’s rise primarily to an increase in the market value of units already issued to non-residents, rather than fresh inflows.
Overseas assets stage a comeback
The more striking shift is on the assets side. Overseas assets of Indian mutual funds grew 23.9% to $10.2 billion in FY26, a sharp reversal from FY25, when overseas assets had actually declined 5.6% to $8.3 billion due to lower holdings of foreign equity. This time, the RBI said the rise mainly reflects higher holdings of foreign equity securities.
Net foreign liabilities ease
With assets growing faster than liabilities, net foreign liabilities of mutual funds declined to $21.3 billion as of end-March 2026, down from $22.3 billion a year earlier. This marks a reversal of the previous year’s trend, when net liabilities had widened sharply to $22.2 billion from $16.6 billion in FY24.
Where are Indian MFs putting their overseas money?
On the investment side, Indian mutual funds significantly stepped up their overseas equity exposure. Investment in overseas equity securities rose 37.5% as of end-March 2026 compared to the previous year, mainly concentrated in the United States, Luxembourg and Ireland.
According to J.P. Morgan, Luxembourg and Ireland are the leading European domiciles for cross-border funds, holding a combined 91% of global assets under management (AUM) for such funds.
Both countries have created thriving ecosystems for complex funds thanks to their expertise in legal fund structures, tax treaty networks, and early adoption of the Undertakings for Collective Investments in Transferable Securities (UCITS) Directive.
In FY25, by contrast, overseas equity investment had actually contracted, though it remained concentrated in the same three markets, which accounted for over 95% of total overseas equity holdings that year.
Japan and Canada now dominate FDI into AMCs
A notable shift shows up in where AMC foreign direct investment is coming from. Japan and Canada together accounted for about 80% of total FDI in AMCs as of March 2026. In FY25, it took three countries, Japan, Canada, and the UK, to cross a similar threshold, together making up over 83% of FDI.
Disclaimer: This article is for informational purposes only and should not be construed as investment advice. Readers are advised to consult a qualified financial advisor before making any investment decisions.