Non-profit organizations have traditionally opted for fixed deposits as their primary investment avenue. However, experts believe that trusts and other non-profits can diversify their portfolios by investing in market-linked instruments such as mutual funds and stocks. The Indian Trusts Act, 1882, as amended in 2017, provides a comprehensive framework for investments by private trusts. It permits investments in government securities, debt mutual funds, corporate debt securities with a minimum AA rating, Basel III tier-I bonds, infrastructure debt instruments, listed companies with a market capitalization of at least INR 5,000 crore, mutual funds with at least 65% equity allocation, and exchange-traded funds (ETFs). Public trusts in Maharashtra have additional investment options under the Maharashtra Public Trusts Act, 1950, including Post Office Savings Bank, government savings certificates, small savings schemes, deposits with cooperative and scheduled banks, units of the Unit Trust of India (UTI), and debentures guaranteed by the central or state government. Section 8 companies, registered under the Companies Act, 2013, can invest in listed or other securities aligned with their non-profit objectives. Societies registered under the Societies Registration Act, 1860, can also invest in mutual funds and listed companies based on the provisions of the Indian Trusts Act, 1882. Despite the legal framework, many non-profit organizations remain hesitant to venture beyond fixed deposits due to risk aversion and a lack of awareness about alternative investment options. Financial advisors emphasize the potential benefits of exploring more efficient and diverse investment avenues to generate additional funds for operating expenses. Charitable trusts, in particular, can benefit from investing in government securities with long-term maturity to lock in high interest rates and mitigate interest rate risk. Expert advice and regulatory guidance can further enhance the deployment of funds by non-profit organizations, ensuring that these institutions can effectively fulfill their charitable objectives.
Investment Opportunities for Non-Profit Organizations in India
