The decision permitting the navratnas and mini-ratnas CPSEs to invest not more than 30 per cent of the available surplus funds in the Sebi-registered public sector MFs will be reviewed after three months, sources in the Finance Ministry said.

Till then, the public sector companies will be allowed to remain invested in the mutual funds managed by PSU banks, sources added.

The government last year had allowed the profit-making central public sector enterprises (CPSEs) to invest their money in the public sector mutual funds and benefit from boom in the stock market. Earlier, CPSEs were not allowed to invest funds in the stock markets or mutual funds, except in units and schemes of the Unit Trust of India (UTI).

Sharp reaction

The decision of the government allowing the CPSEs to invest in mutual funds having equity portfolio evoked sharp reaction from the Left Parties who questioned the rationale behind the move.

The decision was estimated to have paved the way for inflow of more than Rs 60,000 crore in the equity market through mutual fund route.

According to a Crisil study bluechip PSUs, which include about a dozen navratnas and over 50 mini-ratnas, have over Rs 2 lakh crore of surplus cash, out of which 30 per cent could be invested in public sector MFs. The PSUs traditionally have been parking their surplus funds in the fixed deposit schemes of the nationalised banks, RBI bonds and treasury bills.

The Association of Mutual Funds in India (AMFI) has been demanding that the permission to invest should not be restricted to public sector mutual funds as all mutual funds are registered with the market regulator Securities & Exchange Board of India (Sebi) and are subject to same set of regulations.

The investment restrictions, however, do not apply to state-owned banks, insurance companies and domestic financial institutions which can participate in financial trading activities for treasury operations.