Trusts allowed to invest in stock markets

The government on Monday allowed the all trusts to invest in securities, including shares and bonds of listed companies, a move that would further boost the booming market.

For this purpose, an amendment in the Indian Trusts Act, 1982 will be moved in Parliament in the next session to enable the government notify a class of securities as eligible for investment by trusts, said a government statement issued after the meeting of the Union Cabinet here.

A Finance Ministry official said that after the amendment to the Act, the government would allow all trusts set up under the Act, which include private and public trusts like educational trusts, to invest in shares, scrips, stocks, bonds, debentures, debenture stock or other marketable securities.

Analysts said the measure could release thousands of crores of surplus funds, presently invested in risk-free bank deposits, into the stock markets.

Earlier, the government used to allow trusts to invest in securities on a case by case basis. This practice would now be done away with, the official said.

As per the Indian Trusts Act, the trusts are already allowed to invest in units issued by the Unit Trust of India (UTI) under any unit scheme.

Referring to the Securities Contract Regulations Act, 1956, the official said option in securities would also allow trusts to purchase or sell securities in future including put and call in securities.