In a move that could bring in thousands of crores of rupees in investment into the stock markets, the government is planning to amend rules for private trust to permit them to park their funds in listed shares and specified debt securities.
The government will amend the Indian Trusts Act 1882, and once amended, the legislation will enable the government to notify a ‘class of securities’ as eligible for investment by private trusts. The cabinet approved the amendment Bill for this in 2007 and the proposals were further amended in October last year. It has been introduced in Lok Sabha again in the current session.
The proposed changes would also do away with the requirement of case-to-case approval by the government of investment into securities the funds largely parked in fixed-deposits and similar debt instruments. The trustees would now get greater autonomy and flexibility to take decisions by assessing the risk-return trade-offs.
It is most likely that private trusts may be allowed to adopt the investment pattern specified for non-government provident, gratuity and pension funds. These funds are now allowed to directly park up to 15 per cent of their investible funds in shares or companies on which derivatives are traded on the Bombay Stock Exchange or the National Stock Exchange.
“It would be consistent with the current economic environment and the present shift from a merit-based regulatory regime to disclosure-based regulatory regime,” the statement explaining the Bill said.
There are thousands of trusts in India that include religious and charitable trusts as well as statutory trusts formed by the government and quasi-government bodies managing large sums of money.
The largest trusts in India are the port trusts that were constituted under the Major Port Trust Act. These include the Bombay Port Trust, Madras Port Trust, Calcutta Port Trust, and Cochin Port Trust.
Industry analysts say the few major port trusts alone are estimated to be managing funds amounting to more than Rs 20,000 crore.
In addition, employee welfare trusts and religious and charitable trusts also have substantial funds. These include the Tirumala Tirupati Devasthanams, Ramakrishna Mission, Swaminarayan Trust and the Mata Vaishno Devi Trust.