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The finance ministry — in an office memorandum on Wednesday —allowed public sector undertakings (PSUs) to invest in debt schemes of all mutual funds.
Earlier, provisions limited central public sector enterprises (CPSEs) to investment in public sector mutual funds only, in which the government held more than 50 per cent share.
“The period of maturity of any instrument of investment shall not exceed one year from the date of investment, except in case of term deposits with banks and government securities where it can extend up to three years,” it added.
The department of investment and public enterprises (DIPAM) — in the official memorandum — said the guidelines are based on proposals received from CPSEs, mutual funds and private sector banks citing liberalisation of policies and introduction of new monetary instruments for trade in short-term funds.
“The proposals were examined by the inter-ministerial Committee for Monitoring of Capital Management and Dividend, which currently considers all capital restructuring matters of CPSEs,” it added.
The communication by DIPAM said that only Maharatna, Navratna and Miniratna CPSEs are permitted to invest in debt-based schemes of mutual funds.
However, these guidelines will not apply to state-owned banks and insurance companies. It also bars the involvement of any broker or agent in any form on either side.
The investment of surplus funds would be guided by the principles of safety of funds and due diligence. The provision defining public sector mutual funds has been deleted.
The guidelines issued by DIPAM on investment of surplus funds by CPSEs supersede the earlier guidelines issued by department of public enterprises in 2017.
The memorandum said the eligible instruments available for investment of surplus funds by CPSEs include treasury bills, government securities, term deposits with scheduled commercial banks, commercial banks’ instruments, loans or deposits with CPSEs and mutual funds.
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