UTI, SBI MF to manage postal insurance funds

The Union Cabinet today appointed public sector mutual fund managers, Unit Trust of India Mutual Fund (UTI MF) and State Bank of India Mutual Fund (SBI MF), for investment of post office live insurance fund (POLIF) and rural post office life insurance fund (RPOLIF) by relaxing the provisions of general financial rules. The two are expected to invest funds into the booming capital market.

Finance Minister P Chidambaram told reporters that the move to allow SBI and UTI mutual funds follows the decision of the department of posts to invest funds in a manner which will bring better returns to the investors.

The finance minister said since Life Insurance Corporation (LIC) is a competitor for POLIF and RPOLIF, it was not considered to manage the funds.

When asked if the postal money would find its way to the stock market, Chidambaram said it was up to the fund managers to decide.

Chidambaram added the PSU fund managers are expected "to follow safe and conservative investment policies" for the money raised largely from rural areas.

POLIF has a corpus of Rs 8,934 crore, while in case of RPOLIF the sum stood at Rs 1,625 crore as on March 31, 2006.

"Much of this money has already been invested, but the MFs will manage the accumulated funds," he added.

Chidambaram said the scheme has been formulated on the lines of the National Investment Fund - a disinvestment corpus, which has been entrusted to three PSU managers, LIC, SBI and UTI.

The cabinet also approved the constitution of an investment board for laying down policy guidelines and investment strategy for the postal funds. A chief investment officer with the rank of additional secretary will be appointed along with four directors and 11 secretarial support staff for managing and devising day-to-day strategies for these investments.