New Delhi: Private provident funds, superannuation funds and gratuity funds that manage employee savings of many a corporate house may soon have to appoint an asset management company (AMC) or investment advisor to ensure that they deploy the money efficiently.
The finance ministry is “seriously looking at” a proposal to make it compulsory for such trusts to hire such advisors. Guidelines in this regard would soon be issued, a senior government official, who did not wish to be named, said on Tuesday.
Incidentally, the finance ministry had, in September 2007, issued draft rules on the proposed investment pattern for such trusts. The plan sought to let them invest in the capital market more and less in the securities of central and state governments. The ministry suggested doubling their capital market exposure from 5% and cutting their spread in government securities from 40% to 35%. The final norms are likely soon, he said.
The rules will be applicable to trusts managing funds above a threshold, say Rs 50 crore, which is yet to be finalised. At present, there is no centralised data available on the size of the funds managed by such trusts registered with different state authorities. The government has started collecting data and the process would be completed soon, the official added.
“In these trusts, investment decisions are made by people who are not essentially professionals. These decisions make a difference in the financial health of a lot of people who are in their twilight years. Such decisions have a direct bearing on the livelihood of these people. The government is seriously looking at the proposal,” the official said.
The finance ministry is also spearheading a major change in the way financial markets are regulated to make the regulatory regime in sync with vibrant market dynamics, the official said. For this, the ministry will first push for a regulatory audit that would take stock of the result of various regulatory decisions after a reasonable period.
The finance ministry is “seriously looking at” a proposal to make it compulsory for such trusts to hire such advisors. Guidelines in this regard would soon be issued, a senior government official, who did not wish to be named, said on Tuesday.
Incidentally, the finance ministry had, in September 2007, issued draft rules on the proposed investment pattern for such trusts. The plan sought to let them invest in the capital market more and less in the securities of central and state governments. The ministry suggested doubling their capital market exposure from 5% and cutting their spread in government securities from 40% to 35%. The final norms are likely soon, he said.
The rules will be applicable to trusts managing funds above a threshold, say Rs 50 crore, which is yet to be finalised. At present, there is no centralised data available on the size of the funds managed by such trusts registered with different state authorities. The government has started collecting data and the process would be completed soon, the official added.
“In these trusts, investment decisions are made by people who are not essentially professionals. These decisions make a difference in the financial health of a lot of people who are in their twilight years. Such decisions have a direct bearing on the livelihood of these people. The government is seriously looking at the proposal,” the official said.
The finance ministry is also spearheading a major change in the way financial markets are regulated to make the regulatory regime in sync with vibrant market dynamics, the official said. For this, the ministry will first push for a regulatory audit that would take stock of the result of various regulatory decisions after a reasonable period.
Source: The Economic Times
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