New rules will allow PSUs to have a broader range of investment options: Morningstar Invst

Public sector undertaking (PSU) companies were earlier allowed to invest only in debt schemes of public sector mutual funds. However, last week, the government changed the rules to allow investment in all debt schemes of SEBI-regulated mutual funds.

In this episode of, ‘Mutual Fund Corner’, Nasser Salim, Managing Partner, Flexi Capital, and Kaustubh Belapurkar, Director Fund Research, Morningstar Invst Adviser India discuss new investment rules for surplus funds for PSUs.

“The overall sort of schemes of funds available for PSU to invest into were limited and now by opening that up to all mutual funds, all asset managers, that essentially kind of gives a much broader investing option to the PSU companies to go and look at some of the private sector entities too, expanding the universal funds that they can potentially invest into,” Belapurkar said.

Salim said that the government is now looking very closely at the bond market. “Therefore, the surplus cash, which is basically with listed public sector companies, and that quantum is huge, it's close to about the last number that we kind of research was a Rs 1.58 lakh crore. Now, all of that was not being able to get access from a level playing field. I think that has now been addressed because the rationale is that it will help bring in more liquidity in the bond market because there is going to be higher participation. Number two, it's obviously going to get a lot of fillip to the entire mutual fund industry as well.”