Read in: 1min, Published On , 29 Jan 2018 By ET Wealth
Changed laws allow housing cooperatives to invest in Mutual Funds
Recently Indian Trust Act 1882 has been amended which now allows cooperative housing societies to park their funds in Mutual Funds, stocks with market capitalisation of at least- Rs 5,000 crore and are regulated by Sebi. Currently a large number of housing societies in the state park their funds as FDs in cooperative banks. With the falling rate of interest, incomes of housing societies from the funds kept in banks is also dipping, making it tougher for its managers to manage the finances.
Housing societies may have access to two types of funds: The ones they need for maintenance of the premises on a regular basis, for payments to its employees and workers, costs of electricity and water etc.The second type of fund is for meeting expenses which are not regular but usually needed after a few years like renovation of the buildings, painting, repairing of lifts, water pumps, pipelines etc.
Money in Liquid Funds could be accessed on a notice of one working day
Housing societies could put their y collections in Liquid Funds instead of keeping everything in savings bank/current accounts
Liquid Funds can earn them about 6% yearly return while most savings banks pay 4% and current accounts don’t pay anything
FMPs usually pay higher returns compared to FDs of comparable tenure
Housing societies could keep their second type of funds (that is required after some years) in fixed maturity plans (FMPs) from Mutual Funds
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