Financial Daily from THE HINDU group of publications
Saturday, Mar 08, 2003
Financial Daily from THE HINDU group of publications Saturday, Mar 08, 2003 |
|
|
|
|
|
Home Page
-
Small Savings Industry & Economy - Small Savings More leeway for PF bond investments Our Bureau
NEW DELHI, March 7 THE Finance Ministry has given non-Government provident funds, superannuation funds and gratuity funds the leeway to invest up to 30 per cent of their annual accretions in the `residual category', which includes triple-A rated private corporate bonds. This is against the existing ceiling of 20 per cent. Currently, these funds are required to invest at least 25 per cent of their accretions in Central Government securities, with the State Government securities and bonds/securities floated by public financial institutions (PFIs), public sector banks (PSBs) and undertakings (PSUs) accounting for 15 per cent and 40 per cent, respectively. The balance 20 per cent forms the `residual category', which gives the funds the option to invest in any of the three mentioned categories, apart from private corporate bonds that are triple-A rated by at least two credit rating agencies. What the Finance Ministry has now done is to increase the `residual category' proportion from 20 to 30 per cent, while simultaneously making it mandatory to invest only up to 30 per cent of the accretions in bonds and securities of PFIs/PSBs/PSUs, against the earlier minimum requirement of 40 per cent. In other words, additional flexibility has been given to invest in the `residual category', which includes investment-grade corporate bonds. It is a different matter though the Central Board of Trustees of the Employees Provident Fund Organisation (EPFO) and managers of exempted provident funds have so far refrained from investing significant amounts in private corporate bonds. Enhancing the `residual category' ceiling from 20 to 30 per cent may, therefore, not make much difference. But at the same time, the relaxation in the requirement to invest in bonds of PFIs/PSBs/PSUs from a mandatory 40 to 30 per cent is being seen as a move to enable the PFs to diversify their investments, especially in the context of leading PFIs defaulting on their bond redemption obligations. The Finance Ministry has also permitted short-term deposit receipts issued by PSBs as an eligible instrument for investment for incremental accretions. The aggregate investments made by the EPFO-regulated funds are now estimated in the region of Rs 1,25,000 crore, which includes about Rs 90,000 crore by the Employees Provident Fund and Rs 35,000 crore by the Employees Pension Fund. The annual investible sums of these funds are in excess of Rs 15,000 crore.
Article E-Mail :: Comment :: Syndication
|
Stories in this Section |
|
The Hindu Group: Home | About Us | Copyright | Archives | Contacts | Subscription Group Sites: The Hindu | Business Line | The Sportstar | Frontline | The Hindu eBooks | Home |
Copyright © 2003, The
Hindu Business Line. Republication or redissemination of the contents of
this screen are expressly prohibited without the written consent of
The Hindu Business Line
|