The government is considering allowing cash-rich public sector companies (PSUs) to invest in treasury bills and government securities for better liquidity management of its temporary surplus funds.
A committee has been constituted under the department of public enterprises (DPE), headed by department of economic affairs additional secretary Shaktikanta Das, to review the guidelines on investment of excess cash available with state-owned units.
A senior government official told FE, ?Various options are being considered like allowing PSUs to invest their temporary excess funds in treasury bills and private mutual funds.? The aim of the exercise is to achieve better fund management and also get higher returns on investments.
The official further said the committee is also looking to allow PSUs to invest in private mutual funds and equity schemes, but the proposal is still at a nascent stage.
Presentations have been made to the committee by Sebi, RBI, SBI and UTI mutual funds, the official said.
As per the guidelines issued in the past by DPE, public companies are allowed to invest in government mutual funds like UTI. The PSUs are told not to invest in private mutual funds like Kotak Mahindra and others as it can be risky.
So far, the surplus cash available with about 20 CPSEs is around R1.2 lakh crore and is mostly deposited in banks. Finance ministry has advised PSUs not to invite competitive bids from banks for parking their surplus funds as it results in undesirable competition and arbitrary hike in deposit rates.
Public entities mainly deposit surplus funds as short-term deposits with banks and also as fixed deposits.
Most of these investments range from 30 days to anything less than a year.
?Inviting bids for bulk deposits lead to undesirable competition and arbitrary hike in deposit rates. CPSEs should go for card rate and place their bulk deposits with banks with which they have regular course of business? the official said.
The excess cash available with about 20 CPSEs, including PFC, Coal India, Bhel, ONGC, NTPC and PGCIL, is mostly deposited in banks and earns interest at the rate card.
Earlier this year, the Prime Minister\’s Office (PMO) had directed cash-rich PSUs to go for aggressive investments in the current fiscal. With India\’s growth rate at a nine-year low of 6.5% in 2011-12 and its fiscal deficit at 5.9%, the government is seeking some immediate investment to revive economic activity in the country.
