Government has allowed retirement fund body EPFO to invest 5 per cent of its corpus in exchange traded funds which will result into an inflow of around Rs 5,000 crore into the stock markets during this fiscal.
Labour Ministry has notified new investment pattern for the Employees’ Provident Fund Organisation which allows the body to invest 5 per cent of its funds into ETFs.
“We will invest 5 per cent of the investible funds of EPFO into the ETF. The new investment pattern has been notified about two-three days ago,” Labour Secretary Shankar Aggarwal told reporters here.
As per estimates, the EPFO’s incremental deposits for 2014-15 would be around Rs 80,000 crore.
During the current fiscal, the incremental deposits could be around Rs 1 lakh crore as the body had increased the monthly wage ceiling for coverage under its social security schemes to Rs 15,000 from Rs 6,500 in September last year.
Elaborating further, Aggarwal said, “We will begin by one per cent and go up to five per cent by the end of this financial year. They (EPFO) have to reach the figure of 5 per cent by the end of this financial year.”
He further said: “The Finance Ministry had advised us to invest 5-15 per cent of corpus in equity market. We are entering into the equity market for the first time, therefore, we are a little cautious.
“It is hard earned money of the employees. We cannot take that kind of risk (investing 15 per cent of corpus in equity). By end of this fiscal year we will touch a figure of 5 per cent.”
Aggarwal added: “We have to begin investments in ETF only. We will decide how much proportion we will invest in PSU ETFs. If it is in the interest of workers then we will do that.”
Another Labour Ministry official said: ” The Ministry will bring two notifications. One for the unexempted firm which are managed by the EPFO and another for exempted firms which run their PF trusts for managing their workers funds and PF accounts.”
He added: “As per the new investment norms notified for exempted firms, they can invest minimum of 5 per cent into equity and equity-related instruments which can be up to 15 per cent of their corpus.”
Earlier, the EPFO, which has over 6 crore subscribers, has been investing primarily in state and central government securities.
Unionists had opposed any investment in equity or equity-related instruments during the meeting of Central Board of Trustees — EPFO’s apex decision making body — on March 31.
The Finance Ministry has been pitching to park a part of EPFO corpus in the stock market.
It had recently notified an investment pattern for non-government provident funds to enable them to park a part of their funds in stock market.
The new norms prescribe “investment of minimum 5 per cent and up to 15 per cent of the investible funds in equity and equity-related instruments.”