Now CHS can invest in Debt or Equity Mutual Fund

As amendment of the antiquated Indian Trust Act 1882 by Government of India.  Now CHS can invest in Debt or Equity Mutual Fund  MCS ACT 1960  Sec. 70. Investment of funds.- A society shall invest or deposit its funds in one or more of the following:- (a) in a Central Bank or the State Co-operative Bank; (b) in any of the securities specified in section 20 of the Indian Trusts Act, 1882; (c) in the shares, or security bonds, or debentures, issued by any other society with limited liability and having the same classification to which it belongs: Provided that, no society shall invest more than such proportion of its paid up share capital as may be prescribed: Provided further that, the provisions of this clause shall not apply to any investment made by any agricultural credit society in any processing society based on agricultural produce. (d) in any co-operative bank (other than those referred to in clause (a) of this section) or banking company, approved for this purpose by the Registrar, and on such conditions as the Registrar may from time to time impose; (e) in any other permitted by the rules, or by general or special order of the State Government.

Section - 20, Indian Trusts Act, 1882

Investment of trust-money.

20. Where the trust-property consists of money and cannot be applied immediately or at an early date to the purposes of the trust, the trustee shall, subject to any direction contained in the instrument of trust, ²[make investments as expressly authorised by the instrument of trust or in any of the securities or class of securities] as specified by the Central Government, by notification in the Official Gazette :

Provided that where there is a person competent to contract and entitled in possession to receive the income of the trust-property for his life, or for any greater estate, no investment ³[***] shall be made without his consent in writing.

Explanation.—For the purposes of this section, the expression "securities" shall have the same meaning as assigned to it in clause (h) of section 2 of the Securities Contracts (Regulation) Act, 1956.]

Specified securities for investment by Trust u/s 20 of Indian Trust Act 1882

Section 20 of the Indian Trusts Act, 1882 deals with the Investment of trust-money. As per the said section, where the trust-property consists of money and cannot be applied immediately or at an early date to the purposes of the trust, the trustee is bound (subject to any direction contained in the instrument of trust) to invest the money on the specified securities only.

The Finance Ministry by notification has specified the following securities for the purposes of the section 20 as above.

MINISTRY OF FINANCE 
(Department of Economic Affairs) 
NOTIFICATION

New Delhi, the 21st April, 2017

S.O. 1267(E).—In pursuance of section 20 of the Indian Trusts Act, 1882 (2 of 1882), the Central Government hereby specifies the following securities for the purposes of the said section, namely:—

(a) Government securities; 

(b) securities, the principal whereof and the interest whereon is fully and unconditionally guaranteed by the Central Government or any State Government; 

(c) units of debt mutual funds regulated by the Securities and Exchange Board of India established by section 3 of the Securities and Exchange Board of India Act, 1992 (15 of 1992);

(d) listed (or proposed to be listed on exchanges in case of fresh issue) debt securities issued by any body corporate, including a bank and a public financial institution as defined in clause (72) of Section 2 of the Companies Act, 2013 (18 of 2013), which have a minimum residual maturity period of three years from the date of investment; 

(e) Basel III Tier-I bonds issued by a scheduled commercial bank under guidelines issued by the Reserve Bank of India, which are either listed or are proposed to be listed on an exchange; 

(f) the infrastructure related debt instruments listed or proposed to be listed in case of fresh issue:—

(i) debt securities issued by a body corporate engaged mainly in the business of development or operation and maintenance of infrastructure, or development, construction or finance of low cost housing; 

(ii) securities issued by an infrastructure debt fund operating as a non-banking financial company and regulated by the Reserve Bank of India;

 or 

(iii) units issued by an infrastructure Debt Fund operating as a Mutual Fund and regulated by the Securities and Exchange Board of India;

(g) shares of body corporates listed on any recognised stock exchange which has a market capitalisation of not less than five thousand crore rupees as on the date of investment; 

(h) units of mutual funds regulated by the Securities and Exchange Board of India, which have minimum sixty-five per cent of their investment in shares of body corporates listed on a recognised stock exchanges;

 or 

(i) exchange traded funds or index funds regulated by the Securities and Exchange Board of India which replicate the portfolio of the Bombay Stock Exchange Sensex Index or the National Stock Exchange Nifty Index, or those constructed specifically for disinvestment of shareholding of the Government of India in a body corporate:

Provided that the investment under clauses (d), (e) and (f) shall be made only in such securities which have minimum AA rating or equivalent in the applicable rating scale from at least two credit rating agencies registered with the Securities and Exchange Board of India under the Securities and Exchange Board of India (Credit Rating Agency) Regulations, 1999:

Provided further that in case of investment under sub-clause (ii) of clause (f), the ratings shall relate to the non-banking financial company and for that sub-clause, the ratings shall relate to the investment in eligible securities rated above investment grade of the scheme of the fund:

Provided also that if the securities or entities have been rated by more than two rating agencies, the two lowest of all the ratings shall be considered

[F. No. 6/5/CM/2002-Vol.V] 
PRAVEEN GARG, Jt. Secy.