The government may double to ten per cent the ceiling of retirement funds managed by private organisations for investing in listed companies, a move that could further boost the already bullish stock markets.

The finance ministry is likely to take a final decision next week on allowing private provident funds, superannuation funds and gratuity funds to invest up to 10 per cent of their funds in listed shares.

"We had invited public comments on the proposed investment pattern for non-government provident funds, and would take a decision in this regard next week after studying the comments," a senior Finance Ministry official said on Friday.

If these guidelines are followed by private provident funds that have an aggregate investible amount of nearly Rs 300,000 crore (Rs 3000 billion), employees could expect higher yield on their savings as against the present rate of 8.5 per cent. The stock markets have given an average of 25-40 per cent returns in recent years.

The official said the investment pattern guidelines for non-government provident funds would be revised after about two-and-a-half years.

The finance ministry has proposed that provident funds operated by firms could be allowed to invest their funds in shares of companies that have an investment grade debt rating from at least one credit rating agency or companies listed on BSE Sensex or NSE Nifty 50, besides in equity linked schemes of mutual funds regulated by SEBI.

Under the 2005 guidelines, these funds are allowed to invest up to five per cent of their funds in equity market. The union government had earlier given a go-ahead to the central public sector enterprises to invest up to 30 per cent of their surplus funds in the equity market.

The finance ministry has maintained that keeping in view the developments in the stock market and tightening of regulations by SEBI, investment pattern of employees provident funds that are operated by employers need to be changed.

Notably, the Board of Trustees of the Employees Provident Fund had earlier rejected the finance ministry's suggestion to invest even up to five per cent of funds in stock market.

Sources said the finance ministry may also raise the limit of provident funds to invest in central and state government securities from 25 per cent to 35 per cent, besides in mutual funds which solely invest in government securities.

The finance ministry is also expected to allow private provident funds to invest up to 25 per cent of their money in bonds and term deposits of private sector banks as against only in public sector banks.

However, it has proposed that these private banks where money would be deposited, should meet conditions of continuous profitability for three years and should not have non-performing assets more than 5 per cent of its net advances.

Private banks where employees money could be parked will also have to meet the condition of minimum net worth of Rs 200 crore (Rs 2 billion), sources added.