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Centre finalising guidelines for NIF

The department of disinvestment is finalising the investment guidelines for the National Investment Fund.

, TNN|
Apr 24, 2006, 12.25 AM IST
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NEW DELHI: The department of disinvestment is finalising the investment guidelines for the National Investment Fund (NIF). The appointed fund managers for NIF including LIC, SBI and the UTI MF will manage the funds along broad guidelines given by the government. The portfolio managers will have discretionary powers under the rules laid down by Sebi.

The cabinet has approved the constitution of a three-member part-time advisory board, for formulating the investment strategy of the fund. Former LIC chairman, SB Mathur, former chairman Oriental Bank of Commerce, BD Narang are a part of the advisory board.

The 75% returns from the funds will be routed to social sector funds and the remaining for the revival of sick PSUs. The fund will be invested across fixed income instruments, equities, commercial papers, government securities.

The expenditure department, will decide on PSUs that can be revived. Under Sebi norms a portfolio manager advises or directs or undertakes on behalf of the government, the management or administration of the funds.

The discretionary portfolio manager can individually and independently manage the funds from the NIF, in accordance with the needs of the government as long as it does not assume the character of an MF. The portfolio manager is required to have a minimum networth of Rs 50 lakh.

Under Schedule IV of the Sebi (Portfolio Managers) Regulations, 1993, the portfolio manager, before taking up an assignment of management of funds or portfolio of securities on behalf of the government, enters into an agreement in writing with the government clearly defining the relationship and setting out their mutual rights, liabilities and obligations relating to the management of funds.

The performance of a discretionary portfolio manager is calculated using weighted average method taking each individual category of investments for the immediately preceding three years.

The proceeds from the public sector disinvestment process were treated as capital receipts and were accounted as revenue expenditure after being spent. But with the creation of the NIF, the disinvestment proceeds will be retained as capital receipts.

The CEO for NIF, would be appointed through the Central Staffing Scheme and would be at the level of Additional Secretary or Joint Secretary, based on the opinion of the board. The board would be appointed by the FM, with the concurrence of the PM.
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