The Centre on Thursday appointed state-owned Mutual Funds - UTI Mutual Fund and State Bank of India (SBI) Mutual Fund as managers of the corpus (accumulated funds) lying with the Postal and Rural Life Insurance entities.

The decision to appoint the fund managers for Post Office Life Insurance Fund (POLIF) and Rural Post Office Life Insurance Fund (RPOLIF) was taken by the Union Cabinet at its meeting held here.

Analysts consider this move significant as this could lead to investment of the sum into the booming capital market.

“These PSU fund managers are expected to follow safe and conservative investment policies for the money raised largely from rural areas,” Finance Minister P Chidambaram told reporters after the Cabinet meeting. He added that the move would bring better returns to the investors.

Asked why the other major PSU Mutual Fund—Life Insurance Corporation Mutual Fund was not allowed to manage the funds he said, “Since LIC is a competitor for POLIF and RPOLIF, it was not considered to manage the funds.”

Investment

In response to a query whether the postal money would find its way to the stock market with the government appointing PSU MFs to manage the fund, he said it was up to the fund managers to decide.
POLIF has a corpus of Rs 8,934 crore, while in case of RPOLIF the sum stood at Rs 1,625 crore as on March 2006. Much of this money has already been invested, but the MFs would manage the accumulated funds, Chidambaram said.

Mr Chidambaram said the scheme has been formulated on the lines of the National Investment Fund (NIF).
NIF has also been entrusted to three PSU managers. The government has also approved the constitution of an investment board for laying down policy guidelines and investment strategy for the postal funds.