67 Investment of fund moneys

PART XII

RECOGNISED PROVIDENT FUNDS

Investment of fund moneys.

67. (1) All moneys contributed to a provident fund (whether by the employer or by the employees) after the 31st day of October, 1974, or transferred after that date from the individual account of an employee in any recognised provident fund maintained by his former employer or accruing after that date by way of interest or otherwise to the fund may be deposited in a Post Office Savings Bank Account in India or in a current account or a Savings Bank Account with any scheduled bank; and to the extent such moneys as are not so deposited (such moneys as are not so deposited being hereafter in this rule referred to as investible moneys) shall be invested in the manner specified in sub-rule (2).

Explanation : For the purposes of this rule and rules 85 and 101,-

           (i)  moneys received after the 31st day of October, 1974, on transfer, maturity or realisation of any security or deposit forming part of a fund or by withdrawal from any account in a bank (including a Post Office Savings Bank Account) shall be deemed to be moneys accruing to the fund after that date;

          (ii)  "scheduled bank" means the State Bank of India constituted under the State Bank of India Act, 1955 (23 of 1955), a subsidiary bank as defined in the State Bank of India (Subsidiary Banks) Act, 1959 (38 of 1959), a corresponding new bank constituted under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 (5 of 1970), or under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980 (40 of 1980), or any other bank, being a bank included in the Second Schedule to the Reserve Bank of India Act, 1934 (2 of 1934).

(2) The manner of investment referred to in sub-rule (1) shall be in accordance with the following Table, namely :-

Table

Investment pattern

Sl. No.

Investment

Minimum per-

centage of

investible

moneys to be

invested  in

items referred

to in

column (2)

(1)

(2)

(3)

(i)

in  Central Government securities as  defined in section 2 of the Public  Debt Act, 1944 (18 of 1944); and/or units of  such Mutual Funds which have been set up as dedicated funds for investment in Government securities and which are regulated by the Securities and Exchange Board of India;

Twenty-five per cent

(ii)

  (a)  in Government securities as defined in section 2 of the Public  Debt  Act, 1944 (18 of 1944),  created and  issuedby any State Government, and/or units of such mutual funds which have been set up as dedicated funds for investment in Government securities and which are regulated by the Securities and Exchange Board of India; and/or

  (b)  in any other negotiable securities the principal whereof and interest whereon is fully and unconditionally guaranteed by the Central Government or any State Government except those covered under (iii)(a) below;

Fifteen per cent

(iii)

  (a)  in bonds/securities, of a public  financial  institution  or of a public sector company or  of  a  public  sector  bank, which have an investment grade rating from at least two credit rating agencies; and/or

  (b)  Term Deposit Receipts (TDR) up to three years issued by public sector banks; and/or

  (c)  in Collateral Borrowing and Lending Obligation (CBLO) issued by Clearing Corporation of India Limited and approved by the Reserve Bank of India;

Thirty per cent

(iv)

to be invested in any of the above three categories, as decided by their Trustees

Thirty per cent :

Provided that any moneys received on the maturity of investments made prior to the 1st day of April, 2005, reduced by obligatory outgoings, shall be invested in accordance with the manner of investment specified in this sub-rule :

Provided further that the trustees, subject to their assessment of the risk-return prospects, may, if they so decide, divide the total portfolio referred to in clause (i) and sub-clause (a) of clause (ii) of the said Table into tradable and non-tradable categories and upto ten per cent of the said portfolio at the end of the preceding financial year can be treated as tradable and may be used for active management :

Provided also that the tradable portfolio of Government securities mentioned in the second proviso shall be marked to the market and the mutual funds, which have been set up as dedicated funds for investment in Government securities, shall be valued at Net Asset Value at the end of the financial year :

Provided also that irrespective of the proportion of investments stated in clauses (i) and (ii) of the said Table, exposure of a trust to any individual mutual fund which has been set up as a dedicated fund for investment in Government securities, shall not exceed five per cent of its total portfolio at any point of time :

Provided also that the trustees may invest an amount not exceeding five per cent out of the amount referred to in clause (iii) of the said Table in the shares of any company which has an investment grade debt rating from at least two credit rating agencies registered under sub-section (1A) of section 12 of the Securities and Exchange Board of India Act, 1992 (15 of 1992) :

Provided also that the trustees may invest an amount not exceeding one-third out of the amount referred to in clause (iv) of the said Table in the debt instruments of any company, other than a public sector company, which has an investment grade rating from at least two credit rating agencies registered under sub-section (1A) of section 12 of the Securities and Exchange Board of India Act, 1992 (15 of 1992) and/or in equity linked scheme of mutual funds regulated by Securities and Exchange Board of India :

Provided also that in the event of the rating of any instruments mentioned in this sub-rule for being rated and their rating falling below the investment grade, as certified by at least two credit rating agencies registered under sub-section (1A) of section 12 of the Securities and Exchange Board of India Act, 1992 (15 of 1992), then the option of exit from such instruments can be exercised and the released funds shall be invested in accordance with the manner provided in the Table of this sub-rule :

Provided also that any amount invested after 31st March, 2005, but on or before the date of issue of this notification in accordance with the manner of investment in force in this behalf from the 1st day of April, 1997 to 31st March, 2005, shall be deemed to have been invested in the manner specified in this sub-rule.

Explanation 1.-The manner of investment specified in this sub-rule shall apply to the aggregate amount of investible moneys with the fund in the previous year.

Explanation 2.-For the purposes of this sub-rule,-

           (i)  the expression "public financial institutions" shall have the meaning assigned to it in section 4A of the Companies Act, 1956 (1 of 1956);

           (ii)  the expression "public sector company" shall have the meaning  assigned to it in clause (36A) of section 2 of the Income-tax Act; and

           (iii)  the expression "public sector bank" shall have the meaning assigned to it in clause (23D) of section 10 of the Income-tax Act.

           (iv) the expression “public sector bank”shall have the meaning assigned to it in clause (23D) of section 10 of the Income-tax Act; and

           (v) the expression “securities” shall have the meaning assigned to it in clause (h) of section 2 of the Securities Contracts (Regulation) Act, 1956.