The Hindu : Business : PSUs allowed to invest surplus funds in MFs

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PSUs allowed to invest surplus funds in MFs

Special Correspondent

The earlier scheme expired in August

NEW DELHI: The Centre on Friday allowed ‘navratna’ and ‘mini-ratna’ public sector undertakings (PSUs) to invest 30 per cent of their surplus funds in equity markets through public sector mutual fund companies.

The scheme to allow ‘navratnas’ and ‘mini-ratnas’ to invest in public sector mutual fund companies had expired on August 1, 2008, a year after it was notified. “The Cabinet Committee on Economic Affairs (CCEA) discussed the issue and decided to extend the scheme till further orders,” Union Home Minister P. Chidambaram told journalists after the Cabinet meeting.

Reviving industry

Stating that public sector enterprises operate almost on a par with commercial enterprises, Mr. Chidambaram said: “The main thrust of earlier guidelines regarding investment of surplus funds of PSUs was that they should invest their surplus funds only in instruments with maximum safety, with no element of risk on the yield obtained from such investments. It was felt that they were denied a profitable investment opportunity because of restrictive clauses on investment.”

Besides, the PSEs have professional management or access to professional management services and hence were capable of taking investment decisions in their best interest. Mutual funds were now considered as attractive investment opportunities and recommended for retail individual investors, the minister added.

This could be good news for the mutual fund industry that has been hit hard due to the global recession.

Assets under management of mutual fund industry have come down to around Rs. 4 lakh crore from over Rs. 5.50 lakh crore a year ago.

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