India will allow qualified foreign investors to invest up to $10 billion in domestic mutual funds from August 1, a senior finance ministry official said on Friday. 

The government expects good inflows from qualified financial institutions into mutual funds in this fiscal year to March 2012, Thomas Mathew, joint secretary, capital markets at the finance ministry, told reporters on Friday. 

The move to allow qualified foreign investors was first proposed by Finance Minister Pranab Mukherjee in the budget for the fiscal year that started on April 1. 

At present, only foreign institutional investors and sub-accounts registered with the market regulator Securities and Exchange Board of India, and non-resident Indians are allowed to invest in Indian mutual fund schemes.