Maharashtra Allows Trusts to Invest 50% of Corpus in Mutual Funds and Bonds

In a landmark move to modernize financial management practices of religious and charitable organizations, the Maharashtra government has allowed public trusts to invest up to 50% of their corpus in mutual funds, bonds, and exchange-traded funds (ETFs) without requiring prior approval. The decision, effective from July 21, was issued by the state’s Charity Commissioner and applies to thousands of temples, educational institutions, and non-profit organizations registered across the state.

Under the revised guidelines, trusts can now invest in SEBI-regulated mutual funds, ETFs linked to major indices such as the Sensex and Nifty, and corporate or government bonds that meet specific credit rating and maturity requirements. This move significantly simplifies the investment process, as trusts earlier needed case-by-case permissions, often deterring them from entering market-linked instruments.

Maharashtra is home to over 59,000 public trusts, many of which hold substantial financial reserves. Experts estimate that this new rule could release anywhere between ₹5,000 crore and ₹10,000 crore into the financial markets, providing a substantial boost to domestic liquidity and deepening the investor base. It also opens new avenues for trusts to generate higher returns while adhering to prudential norms and fiduciary responsibilities.

While this liberalized framework brings greater autonomy, certain trusts—particularly those availing tax exemptions under Section 12A of the Income Tax Act—must still comply with restrictions under Section 11(5). Moreover, trusts must ensure that their investment strategies align with their internal regulations and long-term objectives.

Industry analysts have welcomed the development, viewing it as a progressive step towards aligning institutional capital with India’s growing capital markets. By enabling greater participation of religious and charitable bodies, the state is not only enhancing asset utilization but also setting a potential precedent for other states to follow.