In an important move, Government has allowed all trusts to invest in securities, including shares and bonds of listed companies. 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. This will be the first amendment to the Act since 1947.

The Cabinet move to approve amendments to the Indian Trust Act comes in the wake of recommendations made by the Law Commission of India.

Earlier, registered trusts could invest their funds either in securities notified by the government on a case-by-case basis or as authorized by the trust’s charter, or under a high court ruling.

An official statement said, “The law is obsolete since it has not been amended even once in last 125 years. The idea is to free investment and let market forces and ratings decide where money should flow from trusts.”

ITA specifies list of instruments where trusts can invest. But it does not factor in developments like the creation of SEBI and development of new instruments. The idea is to update the law, it added.

After the amendment to the Act, the government would allow all trusts set up under the Act, which includes private and public trusts like educational trusts, to invest in shares, stocks, bonds, debentures, debenture stock or other marketable securities, the release said.

At present, there are thousands of trusts in the country, which include religious and charitable trusts as well as statutory trusts formed by the government and quasi-government bodies managing a large amount of money. The move is expected to release several crores into the stock markets and create a set of long-term investors.

A Balasubramanian, CIO of Birla Sunlife Mutual Funds, said, “Trusts may easily have invest-able funds of Rs 15,000-20,000 crore. How much of invest-able surplus they would invest in the stock markets remains to be seen.”