Proceeds of NIF allowed to be used to fund bank recapitalization: CCEA

In a move made to enhance disinvestment policy, the Cabinet Committee on Economic Affairs (CCEA) chaired by PM Dr. Manmohan Singh has permitted the National Investment Fund (NIF) to buy shares of public sector enterprises, including banks and insurance companies.

Now the fund will be use for subscribing to the shares being issued by the Central Public Sector Enterprise (CPSE) including Public Sector Banks (PSBs) and Public Sector Insurance Companies, on rights basis so as to ensure that 51% ownership of the government is not compromised.

National Investment Fund (NIF)

NIF was established in 2005 to channelize the proceeds generated through the sale of minority shareholding of CPSEs. The Fund would be maintained outside the Consolidated Fund of India.

For what purposes the fund is being used currently? Who manages the Fund?

The income from the Fund is to be used for the following broad investment objectives:

  • 75% to finance selected social sector schemes, which promote education, health and employment
  • 25% to meet the capital investment requirements of profitable and revivable CPSEs that yield adequate returns, in order to enlarge their capital base to finance expansion/diversification

However, because of the difficult economic situation caused by global slowdown, the government in November 2009 decided to utilize proceeds from disinvestment only for social sector spending. This exemption is applicable till March 2013.

Who manages the Fund?

NIF fund managers are:

  • UTI Asset Management Company Ltd.
  • SBI Funds Management Company (Pvt.) Ltd.
  • LIC Mutual Fund Asset Management Company Ltd.
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