The government will allow a portion of the countrys $80 billion in employee pensions to be invested in a wider array of debt,including short-term bills,in a bid to boost returns and further develop domestic bond markets.
Fund managers handling money on behalf of the Employees Provident Fund Organisation (EPFO) will also be given more flexibility to invest in corporate bonds,according to new rules from the labour ministry.
The rules have been posted in the labour ministrys website but had not been widely publicised until analysts this week started circulating notes about the changes. The EPFO board would need to approve the changes before they become official.
The EPFO oversees pensions of around 85 million public and private sector employees. It previously allowed fund managers handling its funds to invest only in government bonds and higher-rated corporate debt.
India Life Capital,a private asset manager,said the new rules could increase returns by 10 to 20 percentage points annually.
According to the new guidelines,the government will now allow up to 5 per cent of total pension funds to be invested in money markets,including in treasury bills. It also relaxed rules on corporate bond investments,allowing up to 55 per cent of pension funds to be invested in debt issued by companies,banks and state-run financial firms.