Mumbai: Mutual fund (MF) houses are restricting large inflows into gold exchange traded funds (ETFs) and fund of funds (FoFs) that invest in such schemes, in line with the government's recent policy aimed at discouraging people from buying gold.
Major Fund Houses Implement Restrictions
Three large fund houses—HDFC Mutual Fund, ICICI Prudential Mutual Fund, and Nippon India Mutual Fund—have decided to restrict large inflows into their gold funds. These decisions will take effect between June 5 and June 8.
In a communication, HDFC MF stated, “In light of the broader economic and market conditions, it has been decided to temporarily restrict lumpsum subscriptions in HDFC Gold ETF and HDFC Gold ETF Fund of Fund until further notice.” Similar announcements, in the form of addendums to the scheme information document (SID), were issued by ICICI Prudential MF and Nippon India Mutual Fund.
Government Policy on Gold Imports
After Prime Minister Narendra Modi urged the public to reduce gold purchases, the government increased the import duty on gold from 6% to 15%. Gold is one of India’s largest import items. In fiscal year 2026, the total value of gold imported into the country reached $72 billion, a 24% increase from the previous year.
Details of Restrictions
All three fund houses announced that large investors buying gold ETFs directly from fund houses with a minimum investment of Rs 25 crore will not be permitted to do so. Additionally, lumpsum purchases and switch-ins into FoFs will be processed only up to a limit of Rs 10 lakh per PAN per calendar month.
Nippon Life clarified that the Rs 25-crore restriction will not apply to authorized participants and market makers. This ensures that retail investors in gold funds will not be inconvenienced by this move. The fund house also confirmed that systematic investment plans (SIPs) into gold FoFs will continue, with an upper limit of Rs 50,000 per PAN per day.
These measures are designed to align mutual fund operations with the government's broader economic objectives while minimizing disruption for small investors.
