The Reserve Bank of India may be frowning on non-resident Indian money flows into the banking sector, but the Securities and Exchange Board of India has changed its mind and has started approving schemes floated by mutual funds targeted at NRIs.

Sebi had kept these applications pending for the last 6 months. One scheme has already been approved, three pending applications are in the pipeline while more mutual funds are looking at floating such schemes.

Recently the capital markets regulator approved special NRI schemes floated by SBI Mutual Fund. In the pipeline are three more such schemes from fund houses, and these are at various stages of approval.

There is the "Pravasi Bandhu" scheme from JM Mutual Fund, while Reliance Mutual Fund is proposing to launch both an income scheme as well as an equity scheme for the overseas Indian community. Bank of Baroda Mutual Fund will also shortly file its application for such schemes.

P G R Prasad, managing director, SBI Mutual Fund said, "We plan to tap deposits which are covered by bank deposits. Also, we are also offering an income option for a higher maturity period."

Krishnamurthy Vijayan, chief executive officer of JM Mutual Fund said that most of the NRI money is flowing in from the Middle East.

Typically these kinds of investors like schemes which have a lock-in for a reasonable period of time and this is what the mutual funds are targeting.

Just a month back, the RBI had reduced the interest rates on non-resident – external accounts in three phases.

The intention was to stem inflows into the country through this route, especially in the light of the comfortable foreign exchange reserves, which currently stand at around $90 billion. The central bank is also trying to curb these inflows to ensure the "quality" of remittances.

NRIs, till recently, were putting all their dollar savings into NRE accounts which gave them returns averaging between 5 and 5.5 per cent compared with the sub-2 per cent returns they were getting in the US banks.

The fund houses are also hoping to attract the money from the redemption of the Resurgent India Bonds, which matured recently.