The RBI has taken these steps to make PMS more accessible to HNIs and to boost the growth of the PMS industry. PMS is a type of investment product that is designed for high-net-worth individuals. PMS investments are typically illiquid and carry high risks. However, they also offer the potential for high returns. The RBI’s relaxation of norms for PMS investments is expected to make PMS more accessible to HNIs and boost the growth of the PMS industry.
The relaxation of norms for PMS investments for HNIs by the Reserve Bank of India (RBI)
- The minimum investment amount for PMS has been reduced from ₹25 lakh to ₹5 lakh.
- The lock-in period for PMS has been reduced from one year to six months.
- The exit load for PMS has been capped at 2%.
- The RBI has allowed banks to offer PMS to their high-net-worth customers through their mutual fund arms.
- The RBI has allowed foreign portfolio investors (FPIs) to invest in PMS through the Qualified Foreign Investor (QFI) route.
- The minimum investment amount of ₹5 lacks is applicable for individual HNIs. For HUFs, the minimum investment amount is ₹10 lakh.
- The lock-in period of six months is applicable for all types of PMS investments.
- The exit load of 2% is applicable for all types of PMS investments, except for those that are redeemed within six months of investment.
- Banks that offer PMS through their mutual fund arms will be subject to the same regulations as other mutual fund houses.
- FPIs that invest in PMS through the QFI route will be subject to the same regulations as other FPIs.
The Reserve Bank of India (RBI), the country’s central banking institution, has made changes to the regulations governing PMS investments, specifically concerning the investment limits for High Net Worth Individuals (HNIs).
Previously, HNIs were allowed to invest up to 10% of their net worth in PMS products. However, with the recent relaxation of norms, the RBI has increased the limit to 20% of their net worth. This means that eligible individuals with a higher net worth now have the opportunity to allocate a larger proportion of their overall wealth to PMS investments.
Portfolio Management Services (PMS) are investment services offered by professional portfolio managers or entities who manage investment portfolios on behalf of clients. These services cater to individuals with substantial investable assets and provide them with personalized investment strategies and portfolio management based on their financial goals and risk appetite.
By increasing the investment limit from 10% to 20% of their net worth, the RBI aims to provide HNIs with more flexibility in managing their investment portfolios. This change allows eligible investors to allocate a greater portion of their wealth to PMS products, potentially offering them access to a wider range of investment opportunities and strategies.
It’s important to note that the relaxation of norms for PMS investments is specific to HNIs and their investment limits. The overall regulatory framework for PMS remains in place, which includes registration requirements, disclosure norms, and other guidelines established by the Securities and Exchange Board of India (SEBI), the regulatory body responsible for overseeing portfolio managers and their activities in the country.
As with any investment, individuals considering PMS investments should carefully evaluate the risks, consult with financial advisors, and assess their financial circumstances and investment objectives before making any investment decisions.
