Mumbai civic body wants to invest Rs 66,958 crore, go beyond its usual fixed deposits

For the first time, instead of keeping its available reserved funds – Rs 66,958.09 crore – in fixed deposits in banks, the Brihanmumbai Municipal Corporation (BMC) is exploring other investment options such as forex, debt investment, equity investment, and commodity trading, within the ambit of investments permitted for government bodies by the Government of India (GoI) and the Municipal Corporation Act, 1888.

Currently, the amount has been kept in fixed deposits for 15-month tenure, on which the civic body gets 7% interest. Of the Rs 66,958.09 crore, Rs 52,635.80 crore is reserved for infrastructure projects, Rs 12,963.62 crore for BMC’s liabilities toward pensions and other schemes for its employees, and Rs 1,358.67 crore for special funds.

Praveen Darade, additional municipal commissioner who is in charge of the finance department, said, “We are looking at ways to invest, especially the Rs 12,963.62 crore, reserved for pensions. As the amount reserved for infrastructure projects can’t be used elsewhere, we will see how we can invest it.”

Municipal commissioner Praveen Pardeshi said, “Our liabilities in pensions will boom in a few years, and the BMC’s reserved funds will not meet this increased demand. The GoI allows government bodies to invest a certain small percentage of its funds as dynamic investments, which we want to do.”

For the purpose, the BMC will appoint a financial adviser to prepare an internal investment policy, analyse investment risk, profiling, data basing, and maturity scheduling of its current assets. “We expect the consultant to tell us from where we will get maximum returns on the money meant for infrastructure. If a bank is willing to give us even 1 per cent more interest on a fixed deposit, the BMC is willing to lock it in for longer than 15 months.”

The financial adviser is also expected to prepare reports on any loss in case of a premature withdrawal of the invested money.

According to rules of the Central government, some types of investments are allowed for government bodies such as government bonds. The Mumbai Municipal Corporation Act 1888 also allows BMC to take up certain kind of investments. “If we find a viable option for investment outside the ambit of what is allowed, the BMC can look at amending the MMC Act,” Darade said.

Former municipal commissioner DM Sukthankar said, “There are ways of investing public trusts safely and get more returns. As for more volatile options such as commodity trading, I don’t think any government body would indulge in it.”

Narinder Nayar, chairman of Mumbai First, said “It is a good idea for the BMC to augment its resources, as long as they are safe investments.”