PSUs may get to invest in private sector mutual funds

MUMBAI: Private sector mutual funds may get a pie of the large cash surplus of state-run companies if the government decides to relax cash investment norms of such entities.

Capital market regulator Sebi has written to the government and urged it to do so, making a strong case for private mutual funds. "Since all mutual funds follow the same guidelines of the regulator, there is no case for distinction between public sector-sponsored funds and private ones," said an official aware of the deliberations.

The government may recommend new norms that will allow state-run companies to park up to 40 per cent of their mutual fund investments with private firms. As much as Rs 24,000 crore could become available for investment in private mutual funds if the recommendations are implemented. "There have been some discussions on giving more financial autonomy to public sector units," the official cited earlier said on condition of anonymity, adding that some recommendations were also a part of the Shaktikanta Das committee report.

In 2012, government had set up a committee under current revenue secretary Shaktikanta Das to explore and suggest ways to simplify investment norms for more than 246 public sector units. At present, PSUs can place up to 30 per cent of their deposits with only PSU-sponsored mutual funds.

State-run companies have cumulative deposits of over Rs 2 lakh crore available with them. "Most companies prefer to keep their investments in debt or liquid funds. These funds do not require fund manager's expertise," said another official, adding that such companies generally withdraw their funds within three to five days.

In 2008, the government had allowed only navratna and miniratna PSUs to invest in mutual funds, reversing the earlier rule that allowed investment only in fixed deposits, treasury bills and Reserve Bank of India bonds. The mutual fund industry says that given all PSU-sponsored mutual funds have foreign partners, there is no need to keep private funds out.

PSUs have about Rs 40,000 crore parked in mutual funds, according to industry estimates. "It also benefits the PSUs as they can get the expertise of the entire MF industry rather than being restricted to a few funds," Sundeep Sikka, Reliance Mutual Fund's president and chief executive, said about the possible relaxation of norms.