Maharashtra State permits investment of Public Trust funds in specified securities

Introduction

In exercise of powers under Section 35 read with Section 3 of the Maharashtra Public Trusts Act, 1950 (“Act“), the Charity Commissioner, Maharashtra State, Mumbai, has issued Circular No. 619 dated 21st July, 2025[1] (“Circular“), granting general permission to trustees of public trusts to invest up to fifty percent (50%) of trust money in specified securities without requiring prior approval from the Charity Commissioner for each investment. This development significantly reduces administrative burden by eliminating the need for trustees to file individual applications for investments beyond traditional public securities.

The Circular has come into effect with immediate effect from 21st July, 2025.

Background and Legislative Context

Section 35 of the Act mandates that trust money which cannot be applied immediately must be deposited in scheduled banks, Postal Savings Bank, approved co-operative banks, or invested in public securities. The second proviso to Section 35 empowers the Charity Commissioner to permit trustees to invest in any other manner by general or special order. 

The Circular aligns with the Indian Trusts (Amendment) Act, 2016, which amended Section 20 of the Indian Trusts Act, 1882, and the Ministry of Finance notification dated April 21, 2017, specifying permissible securities for investment. The Circular now addresses the regulatory gap by issuing a general order permitting such investments up to specified limits without individual applications. 

Key Provisions of the Circular

  1. Permitted Securities and Investment Limit

The Charity Commissioner permits trustees to invest up to 50% of trust money in the following 9 categories of securities: 

  1. Government securities.
  2. Securities with principal and interest fully and unconditionally guaranteed by the issued by Central Government (“CG”) or State Government (“SG”).
  3. Units of debt mutual funds regulated by Securities and Exchange Board of India (“SEBI”).
  4. Listed (or proposed to be listed on exchange in case of fresh issue) debt securities issued by body corporates, including a bank and a public financial institution with minimum 3-year residual maturity period from the date of investment.
  5. Basel III Tier-I bonds issued by scheduled commercial banks, under Rserve Bank of India (“RBI”) guidelines listed or proposed to be listed on exchange.
  6. Infrastructure-related debt instruments include those issued in a fresh offering by:
  7. Companies primarily engaged in developing, operating, or maintaining infrastructure projects, or in development, construction, or financing of low-cost housing;
  8. Infrastructure debt funds functioning as Non-Banking Financial Companies regulated by the RBI; and
  9. Units issued by infrastructure debt funds operating as Mutual Funds regulated by the SEBI.
  10.  infrastructure companies, infrastructure debt funds, and infrastructure debt fund units.
  11. Listed shares of companies with market capitalization not less than INR 5,00,00,00,000/- (Rupees Five Thousand Crores only) at the date of investment.
  12. Equity-oriented mutual fund units with minimum 65% investment in listed shares.
  13. Exchange traded funds or index funds tracking Bombay Stock Exchange Sensex or National Stock Exchange Nifty Index, or those constructed specifically for disinvestment of shareholding of the Government of India in a body corporate.

Investments in categories (d), (e) and (f) must have a minimum AA rating or equivalent from at least two SEBI-registered credit rating agencies. Where more than two ratings exist, the two lowest ratings shall be considered for compliance.

  • Practical Implications

The Circular offers significant benefits to trustees:

  1. Eliminates individual application requirements for each investment within permitted categories and limits.
  2. Allows diversification across equity markets, debt instruments, and infrastructure securities.
  3. Access to equity-linked instruments and higher-yielding debt securities may generate superior returns for charitable purposes.
  4. Enables balanced portfolios across asset classes while maintaining safety through credit rating requirements and market capitalization thresholds.

Conclusion

The Circular represents a progressive approach to trust fund management under the Act, balancing investment flexibility with prudential safeguards through investment limits, credit rating requirements, and market capitalization thresholds. Trustees should carefully evaluate their investment strategies to align with the trust’s objectives, risk profile, and fiduciary obligations while leveraging the expanded investment options now available.

[1] https://charity.maharashtra.gov.in/Portals/0/Files/CircularSerialwise/619.pdf

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