Pvt pension funds can invest 5% in equity

Non-government provident funds have been allowed to invest five per cent of their assets in blue-chip shares and 10 per cent in corporate debts and equity-oriented mutual funds from April 2005.

The government has also relaxed the norms for superannuation and gratuity funds in a bid to provide wider avenues for investments in the wake of falling prices of government bonds.

Provident funds can have a maximum exposure of five per cent in gilt funds at any point of time, an official release said.

PF trustees will be allowed to use at least 10 per cent of the total portfolio of government securities for active management subject to marking the portfolio on marked-to-market basis.

The government has allowed PFs to invest in term deposits of banks with a maturity period of up to three years from next fiscal as against the present norm of investing in 1-year deposits.

PFs can also invest in bonds of financial institutions and companies having "investment grade" from at least two credit-rating agencies.

The provident funds can also invest in collateral borrowing and lending operation issued by Clearing Corporation of India and approved by Reserve Bank of India.

These three investments -- bank deposits, bonds and CBLO -- should not exceed 25 per cent of a PF's investments as against the previous limit of 30 per cent.

PFs need to park at least 25 per cent of their funds in central government securities and another 15 per cent in either state government securities or debt mutual funds approved by Securities and Exchange Board of India.

There has been no change in investment norms in these two categories.