Provident funds will be able to invest in private-sector securities, which have an investment grade rating from at least two credit rating agencies. "It is encouraging for the credit-rating agencies to note that the honourable minister has acknowledged the importance of dual rating in large debt issues," said Icra managing director PK Choudhury.

Over the past few years, financial institutions have been lobbying with the Centre to gain access to PFs. Currently, the total corpus of pension and provident funds in the country stands at nearly Rs 60,000 crore. Of this, exempted PFs account for over 50 per cent of the total corpus.

Currently, pension and provident funds are allowed to park 15 per cent of their corpus in state government securities and bonds (withgovernment guarantee), 25 per cent in central government securities and 40 per cent in bonds offered by public-sector undertakings and financial institutions.

The remaining 20 per cent can be invested in any of the above three categories at the discretion of the fund manager.Following repeated representations, provident fund trusts have been allowed to invest in non-gilt-edged securities to the extent of 60 per cent of their annual accruals. The inclusion of non-gilt-edged securities, has, to some extent, improved returns of PFs.