Govt may relax PFs’ debt funding rules

NEW DELHI: Provident fund (PF) subscribers and investors in insurance companies may find themselves on a better wicket soon. The government is planning to give more leeway to PFs and insurance companies in their debt market investments.

The finance ministry may allow the funds and insurance companies the freedom to invest in slightly lower than top-notch bonds like triple A rated ones, finance ministry officials said.

The relaxation in investment guidelines will come as a big relief for the funds like EPFO, which at present are facing the spectre of sitting idle over

Rs 4,000 crore of cash, soon. The debt market is facing a real shortage of top-quality papers as the number of buyers in the market has gone up sharply.

Instead, deploying funds in the lower-rated debt market will provide them the avenue to generate income to keep up their returns. The PFs are facing a tough time in ensuring an 8.5% return annually within their present investment limits.

According to present investment rules, PFs can put 25% of their investments in bonds/securities of public financial institutions and public sector companies including public sector banks, provided these instruments have an investment grade rating from at least two credit rating agencies; and/or term deposit receipts up to three years issued by public sector banks.

The proposal is a win-win situation not only for the funds but also for the infrastructure sector companies.