Chidambaram said the move to allow fund managers for Post Office Life Insurance Fund (POLIF) and Rural Post Office Life Insurance Fund (RPOLIF) follows the decision of the Department of Post to invest the funds in a manner which will bring better returns to the investors.

The Finance Minister said since LIC [Get Quote] is a competitor for POLIF and RPOLIF, it was not considered to manage the funds. The government also approved the constitution of an investment board for laying down policy guidelines and investment strategy for the postal funds.

A chief investment officer with the rank of additional secretary will be appointed along with four directors for managing and devising day-to-day strategies for these investments.

Supported by foreign inflows, the Indian stock market in the recent past has been booming with the benchmark Sensex crossing the 20,000-point mark on December 11.

When asked if the postal money would find its way to the stock market, Chidambaram said it was up to the fund managers to decide.

POLIF has a corpus of Rs 8,934 crore (Rs 89.34 billion), while in case of RPOLIF the sum stood at Rs 1,625 crore (Rs 16.25 billion) as on March 2006. "Much of this money has already been invested, but the MFs will manage the accumulated funds," he added.

Chidambaram said the scheme has been formulated on the lines of the National Investment Fund -- a disinvestment corpus, which has been entrusted to three PSU managers.