Investors who had expected to be able to invest in global mutual funds -- which are known to generate returns of 30-50 per cent plus -- are in for a shock. 
 
The Reserve Bank of India will be notifying banks that those floating global products can offer only deposit-based products. Leading foreign and private banks had been planning to offer mutual fund products to investors but this would put paid to such plans. 
 
The National Democratic Alliance government had given resident Indians freedom to remit funds of up to $25,000 annually overseas. 
 
According to sources, while the RBI is likely to come out with a guidance note laying down the process by which global products can be offered, it will also determine who can sell these products. 
 
Only banks regulated by the RBI are likely to be allowed to offer these products. If entities not supervised by the central bank are keen on tapping Indian investors who wish to invest overseas, they will have to seek permission from the Securities and Exchange Board of India. 
 
Finally, the central bank might insist on foreign exchange deposit products being insured. The RBI had earlier issued a circular making it mandatory for any entity offering products under the $25,000 scheme to seek RBI approval. 
 
As a precautionary measure, it further specified that any entities that did not have a base in India would have to have a rating by international rating agencies and should be operating under credible regulatory authority in the parent country. 
 
Within 24 hours of the RBI announcing freedom for Indian residents to remit up to $25,000 overseas on February 4, banks had rushed to launch products to tap the 'global' Indian. 
 
Citibank was the first off the block, closely followed by ICICI Bank with its suite of products through its offshore Singapore branch. Bank of Baroda followed suit, as did HSBC as well as Standard Chartered Bank. 
 
While most banks initially came out with foreign currency deposit products, some like HSBC and Stanchart launched a range of offshore funds. 
 
On March 18, the RBI came out with a circular on 'Liberalised Remittance Scheme of $25,000 for Resident Individuals-Investor Protection – Disclosure Requirements'. 
 
This forced banks to put all global product offerings on hold as the central bank asked them to seek permission before launching any product. Despite all the concerned banks having put in a formal application to the RBI, no approval has since been granted.