Nod for PSE investment in private debt MFs

More Leeway

- PSEs can invest in Treasury Bills and Govt Securities

- They can also park funds in the term deposits of a commercial bank with a net worth of Rs500 cr

- PSEs must ensure 60% of the bank term deposits placed with PSBs

- Portfolio management schemes of any asset mgmt firm will not be considered as MF

New Delhi: The government has allowed Maharatna, Navratna, and Miniratna public-sector enterprises (PSEs) to invest in the debt-based schemes of private-sector mutual funds (MFs) regulated by the Securities & Exchange Board of India (Sebi). Till now, Maharatna, Navratna, and Miniratna PSEs were allowed to park their surplus funds only in the debt schemes of public sector MFs.

The Department of Investment & Public Asset Management (DIPAM) has stipulated that PSEs need to ensure the safety of the funds invested in MFs. Investment in MFs shall not exceed 30 per cent of the available surplus fund of a PSE.

DIPAM has also barred speculation on the yield obtaining from the investment, official sources told Bizz Buzz. In cognizance of the normal occurrence of the difference between the final yield and the one estimated at the time of investment, such investment will not be deemed as speculative in nature.

This is because the difference could be the result of unforeseen circumstances. DIPAM has directed PSEs to put in place a centralized system of liquidity management for optimum utilization of liquidity for the business operation.

DIPAM has allowed PSEs to invest in treasury bills and government of India securities. They can also park their funds in the term deposit of a commercial bank with a net worth of Rs500 crore and more. While investing, PSEs must ensure that a minimum of 60 per cent of the bank term deposits are placed with public-sector banks, sources said.

PSEs have also been allowed to invest in the instruments issued by commercial banks incorporated in India. However, portfolio management schemes of any asset management company will not be regarded as a MF.

The MF debt scheme should have been accorded the highest rating by a credit rating agency registered with Sebi. Further, that MF scheme should have a corpus of Rs1,000 crore at the time of the investment.