The Unit Trust of India (UTI) is considering a special institutional investor equity scheme to route investible surplus of banks to the capital market.
The government is examining the issue of advising public sector banks to invest in the capital market through UTI and other mutual funds.
Under the RBI's guidelines, banks are allowed to invest 10 per cent of incremental deposits in the secondary market. The government has to take up the matter with the RBI to allow public sector banks to invest through mutual funds.
"If banks agree, we are considering a proposal to float a special equity scheme on the lines of the IISFUS income schemes. The fund will be close-ended and will not have assured returns," a UTI official said. "Since there will be only a few investors, it will be easier for us to manage such a scheme. The cost of fund management will also be low."
UTI had earlier made presentations to various banks. However, "we received a lukewarm response as we failed to convince banks about routing funds to the capital market," the official said.
Meanwhile, the Bombay Stock Exchange (BSE) has, through a recent circular, urged the Centre to allow banks to invest incremental deposits in the secondary market through a special equity scheme.
"We have witnessed a 10 per cent fall in the sensex since the budget. We have urged the government to allow financial institutions like Life Insurance Corporation and General Insurance Corporation to support the market. Besides, public sector banks can be asked to invest their surplus in the capital market," a senior BSE official said.
"We are aware of the BSE proposal and the fact that the government is examining the option," the UTI official said.
