The Union Cabinet today approved an amendment in law that would allow trusts to invest in securities, including shares and bonds of listed companies. The move could see thousands of crores of rupees flowing into the capital market and help boost the market sentiment in the near future.
The Cabinet, which met here today, approved a proposal to replace Section 20 of the Indian Trusts Act, 1882, in the next session of Parliament, to make it more contemporary. In its original form, Section 20 allows the surplus money of trusts to be invested in only pre-designated securities. It has obsolete provisions such as those relating to promissory notes, debentures, stocks and other securities of the United Kingdom of Great Britain and Ireland, and annuities charged or secured by Parliament of the UK.
“Section 20 of the Indian Trust Act is a relic of the British Raj. It is no longer relevant today,” Finance Minister P Chidambaram told reporters after a meeting of the Cabinet today.
A Law Commission report had recommended that particular securities in which trusts could invest should not be enumerated and investment should be allowed in all categories of securities available in the market. It had also recommended that those securities that had become obsolete should be deleted from the Section.
After the amendment, the government will allow all trusts set up under the Act — which include private and public trusts like religious trusts and educational trusts — to invest in shares, scrips, stocks, bonds, debentures, debenture stock or other marketable securities, say sources.
In other decisions, the Cabinet approved the setting up of Plasma Fractionating Centre as part of a drive to control diseases such as AIDS. The centre will be set up at an investment of Rs 185 crore.
“This will be the first such centre in the country. The government has not yet decided where this facility will be set up, but it is likely to come up in a metro city which has a large blood bank and a hospital,” Chidambaram said. The approved investment did not include the land cost, he added. The centre will have a capacity to process 1.5 lakh litres of blood annually. Plasma is a component of blood and its transfusion is a life-saving measure for many medical conditions.
The products from the centre would be sold to public sector hospitals at affordable prices, Chidambaram said.
The Cabinet also approved the construction of a new hospital for personnel and ex-servicemen of the armed forces.
The hospital, to be set up in Pune along with a dental care centre, will involve an investment of Rs 270.77 crore.
