Public sector enterprises can put their surplus cash in only those mutual funds where the government?s holdings are above 50% of their total equity. The department of public enterprises (DPE) has issued the much sought-after clarification to all government departments and ministries on the definition of a public sector mutual fund, paving the way for a massive capital inflow into the stock market.
According to the DPE?s letter of December 4, a public sector mutual fund means a fund registered with and regulated by Sebi, and the one in which the government, its financial institutions and public sector banks, individually or collectively, hold more than 50% of equity in the asset management company of that fund.
Officials said mutual funds that would qualify for investments would include funds like the UTI MF, SBI MF, Canbank MF, LIC MF and Bank of
Baroda MF.
In August, the government had allowed public sector companies to invest their cash surpluses in debt and equity schemes of public sector mutual funds. However, officials said a number of references were received by the DPE from different ministries, PSEs and other agencies, seeking clarification on the definition of a public sector mutual fund.
The total surplus of central PSUs in 2005-06 was estimated at Rs 2,39,535 crore, according to the public enterprises survey of the DPE. The bulk of this surplus is accounted for by ?navratnas? and ?mini-ratnas?. There are currently 12 ?navratnas? and 54 ?mini-ratnas?.
Currently, blue-chip PSU companies park their surplus funds in fixed deposits of nationalised banks, RBI bonds and treasury bills. The government?s new directive allows the PSEs to invest 30% of the surplus funds in equity mutual funds.
Market analysts are unhappy with the government?s decision to restrict investments by CPSEs only to public sector mutual funds.