Park your funds aggressively but wisely: govt to PSUs

To ensure that public sector entities keep making dynamic investments, the Centre has said that ‘investible surplus’ will now only mean funds remaining with the companies after infusing funds in core business activities and used options for capital restructuring, such as buyback and bonus issue of shares.

The new norms come at a time when the government is hoping to use higher public investments to boost the economy, as private sector investment remains weak.

Officials point out that PSUs that are estimated to have over ₹2.7 lakh crore of surplus cash have also shied away from investing or using their funds aggressively. Most prefer to invest them in safe options or let them lie around idly, the officials added.

Accordingly, the Department of Public Enterprises (DPE) has said that ‘cash surplus’ will include even those funds that are lying idle for a few days or weeks.

Each PSU will inform its nodal ministry of the projected surplus available at the start of the financial year and ideally also make projections for every month or quarter.

Wanting PSUs to have a more dynamic investment model, the DPE has said that they should put in place a centralised system of liquidity management to ensure they can use their funds in the best possible manner for their business operations.

Decisions on the investment of such funds would be taken by the board of the PSU. An annual report on surplus funds and investments should also be placed before the board.

“Funds shall normally not be invested by a CPSE (Central Public Sector Enterprises) at a particular rate of interest while it is resorting to borrowing at an equal or higher rate,” the norms warned.

Investments can be made in instruments such as treasury bills, government securities, term deposits, loans and deposits with other public sector units or in commercial paper floated by them, mutual funds and collateralised borrowing and lending obligations.

“CPSEs shall ensure that a minimum of 60 per cent of funds placed in bank deposits are placed with public sector banks,” said the norms, adding that state-run firms can also seek competitive quotations from banks to see which offers the best return.

CPSEs can also invest up to 30 per cent of their available surplus funds in mutual funds.

The norms also mandate that the maturity of investments should not exceed one year although exceptions can be made in case of term deposits with banks and government security, where the tenure can be up to three years.

According to Union Budget 2017-18, the internal and extra budgetary resources or funds deployed by PSUs and commercial departmental undertakings is estimated at ₹3.85 lakh crore, against ₹4.06 lakh crore in the revised estimates for last fiscal.

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