Cabinet allows National Investment Fund to buy PSU shares

Cabinet allows National Investment Fund to buy PSU sharesThe National Investment Fund (NIF) on Thursday got the Cabinet's nod for buying shares of public sector undertakings (PSUs), including banks and insurance companies.

The Cabinet Committee on Economic Affairs (CCEA), chaired by Prime Minister Manmohan Singh, gave the approval in a bid to align the NIF operation to boost the government's disinvestment policy.

So far the NIF money has been used to meet the capital spending requirements of selected social sector schemes. But, now it would also be utilized towards capitalization of PSUs.

As per an official release, the disinvestment proceeds effective from the financial year 2013-14 will be credited to the existing `public account' under the head NIF. The money will remain there until it is withdrawn for the approved purposes.

The Fund will also be used for issuing preferential allotment of shares of the CPSE to promoters according to capital market regulator SEBI's norms so that government's shareholding doesn't fall below 51 per cent.

The official release states that the NIF will be used for "subscribing to the shares being issued by the Central public sector enterprise (CPSE). on a rights basis so as to ensure that 51 per cent ownership of the government is not diluted."

Established in 2005, the NIF is managed by three fund managers, viz. UTI Asset Management Co, SBI Funds Management Co and LIC Mutual Fund Asset Management Co. These fund managers will stand discharged of their responsibilities once the funds & the interest income are moved to the NIF.