Trusts in Maharashtra get go-ahead to invest funds in debt, equity MFs, index funds, ETFs

.

Trusts in Maharashtra can now invest up to 50 percent of their funds in securities including  debt mutual funds, equity mutual funds with at least 65 percent holding in listed shares, exchange-traded funds, and index funds among other instruments.

The Charity Commissioner of Maharashtra, by way of a circular, has allowed trusts in the state to invest the trust money in such securities along with listed debt securities, Basel III Tier  1 bonds, and government securities.

This assumes significance as trusts were allowed to deposit their funds -- that cannot be deployed immediately -- only in a bank or a post office till now.

The circular highlighted the fact that while Section 35 of the Maharashtra Public Trusts Act states that trusts can only park their money in a bank or a post office, Section 20 of Indian Trusts Act, 1882 permits the trustees to invest the trust money in any security as specified by the Central Government.

Thereafter in April 2017, the Ministry of Finance issued a notification, specifying the securities in which trusts can invest their money but added that such investments cannot be done without seeking permission of the Charity Commissioner.

"... it is expedient and in the interest of the Trust that the trustee be permitted to invest certain amount of Trust money in the securities specified by the Central Government without requiring him to every time file an application before the Charity Commissioner," stated the circular.

"Now therefore, the Charity Commissioner of Maharashtra State, Mumbai, in exercise of the powers conferred by section 35 of the Act, hereby issues a general order and permits the trustee of the Public Trust to invest upto fifty percent (50%) of the Trust money in the following securities, and subject to the conditions specified by the Central Government in the notification dated 21st April, 2017," it added.

Apart from the above-mentioned securities, the trusts have also been allowed to invest in securities issued by infrastructure debt fund operating as an NBFC and regulated by the RBI, and units issued by infrastructure debt fund of any SEBI-registered mutual fund.

Incidentally, in the case of ETFs or index funds, the Charity Commissioner has allowed investment in only those schemes that replicate the benchmark Sensex or Nifty or any such benchmark constructed specifically for divestment of public sector undertakings (PSUs).

Also, in the case of investing in certain debt instruments, the rating threshold has been pegged at a minimum AA or equivalent.

The new investment norms have come into force with immediate effect, stated the circular issue on July 21.