Postal life funds set to get into stock market
The Union Cabinet on Thursday appointed UTI MF and SBI MF as managers for the over Rs 10,000-crore corpus funds. Stocks to watch | Heard on the street
By TNN |
NEW DELHI: The government has allowed the Postal Life Insurance Fund (POLIF) and Rural Postal Life Insurance Fund (RPOLIF) to enter the markets through investments in public sector mutual funds. The Union Cabinet on Thursday appointed UTI MF and SBI MF as managers for the over Rs 10,000-crore corpus of these two funds. It also approved setting up of a board for framing investment policies. This would primarily be applicable to new deposits into these schemes, as much of the existing corpus is already invested in government bonds.
Briefing newspersons after the Cabinet meeting here, finance minister P Chidambaram said the PSU fund managers are expected “to follow safe and conservative investment policies” for the money raised largely from rural areas.
Asked if the postal money would find its way into the stock market, Mr Chidambaram said it was up to the fund managers to decide. “Much of this money has already been invested, but the MFs will manage the accumulated funds,” he added.
While focusing primarily on the safety of investments, the fund managers would seek investment avenues that would fetch better returns. In effect, this could mean investing part of the corpus of these funds in stocks and mutual funds, which provide higher returns.
While POLIF had a corpus of Rs 8,934 crore, deposits under RPOLIF stood at Rs 1,625 crore as on March 2006. As of now, the entire corpus of these funds goes into the government’s Special Deposit Scheme, which fetches a fixed return of 8% but is fully secured due to sovereign backing.
The finance minister said the scheme has been formulated on the lines of the National Investment Fund—a disinvestment corpus that has been entrusted to three PSU managers. Norms for NIF stipulate that only up to 15% of the total funds can be invested in equity funds while 85% has to be parked in debt funds.
In the case of postal funds, however, the government is constituting a board for laying down policy guidelines and investment strategies. A chief investment officer in the rank of additional secretary will be appointed along with four directors for managing and devising day-to-day strategies for these investments.
In effect, this could mean that more than 15% of the funds could be invested in stocks and mutual funds. The FM said the move to allow SBI and UTI mutual funds follows the decision of the department of post to invest the funds in a manner that will fetch better returns for investors. He added since LIC is a competitor of POLIF and RPOLIF, it was not considered to manage the funds.
Briefing newspersons after the Cabinet meeting here, finance minister P Chidambaram said the PSU fund managers are expected “to follow safe and conservative investment policies” for the money raised largely from rural areas.
Asked if the postal money would find its way into the stock market, Mr Chidambaram said it was up to the fund managers to decide. “Much of this money has already been invested, but the MFs will manage the accumulated funds,” he added.
While focusing primarily on the safety of investments, the fund managers would seek investment avenues that would fetch better returns. In effect, this could mean investing part of the corpus of these funds in stocks and mutual funds, which provide higher returns.
While POLIF had a corpus of Rs 8,934 crore, deposits under RPOLIF stood at Rs 1,625 crore as on March 2006. As of now, the entire corpus of these funds goes into the government’s Special Deposit Scheme, which fetches a fixed return of 8% but is fully secured due to sovereign backing.
The finance minister said the scheme has been formulated on the lines of the National Investment Fund—a disinvestment corpus that has been entrusted to three PSU managers. Norms for NIF stipulate that only up to 15% of the total funds can be invested in equity funds while 85% has to be parked in debt funds.
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In the case of postal funds, however, the government is constituting a board for laying down policy guidelines and investment strategies. A chief investment officer in the rank of additional secretary will be appointed along with four directors for managing and devising day-to-day strategies for these investments.
In effect, this could mean that more than 15% of the funds could be invested in stocks and mutual funds. The FM said the move to allow SBI and UTI mutual funds follows the decision of the department of post to invest the funds in a manner that will fetch better returns for investors. He added since LIC is a competitor of POLIF and RPOLIF, it was not considered to manage the funds.
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