Capital market regulator Securities and Exchange Board of India (Sebi) has written to the government and urged it to relax cash investment norms of public sector undertakings (PSUs). It made a strong case for private mutual funds, according to news reports.

The government may recommend new norms that will allow state-run companies to park up to 40 per cent of their mutual fund investments with private firms. As much as Rs 24,000 crore could become available for investment in private mutual funds if the recommendations are implemented.

In 2012, government had set up a committee under current revenue secretary Shaktikanta Das to explore and suggest ways to simplify investment norms for more than 246 PSUs. At present, PSUs can place up to 30 per cent of their deposits with only PSU-sponsored mutual funds.

In 2008, the government had allowed only Navratna and Miniratna PSUs to invest in mutual funds, reversing the earlier rule that allowed investment only in fixed deposits, treasury bills and Reserve Bank of India bonds.

State-run companies have cumulative deposits of over Rs 2 lakh crore available with them. PSUs have about Rs 40,000 crore parked in mutual funds, according to industry estimates.