SEBI chairman bats for routing EPFO money to equity markets

Written by Avinash Nair | Ahmedabad | Updated: Sep 26 2014, 00:46am hrs
UK SinhaUK Sinha batted strongly for investing 15 percent from the EPFO in the equities and securities market. (PTI)
The chairman of Securities and Exchange Board of India (SEBI), UK Sinha on Thursday batted strongly for investing 15 percent of the Rs 7 lakh crore of corpus from the Employees' Provident Fund Organisation in the equities and securities market as mandated by the Union Finance Ministry.

"Talking about reforms, especially in the context of those who have the mandate --- who have the funds, but who are not letting their funds be invested in the market --- the first example and the biggest example that comes to my mind is EPFO. If you look at any other country in the world, whether it is a communist or a 100 percent capitalist-oriented country, the workers' pension money is invested in securities market," said Sinha while speaking at an event in Gandhinagar.

"The EPFO, for example, has a size of more than Rs 7 lakh crore. Their annual accruals is more than Rs 70,000 crore. There is a rule or an enabling provision from the Ministry of Finance that up to 15 percent can be invested in the equity market --- five percent directly and 10 percent through mutual funds. But that debate has been going on for decades now. Unfortunately, there has been no forward movement," he added.

"I would strongly urge that we have to think in terms of allowing long term pension money into the market," Sinha said adding that pushing the pension money into the market could also act as a "counter balance" to a possible exodus of foreign funds.

"Foreign Portfolio flows to the tune of $ 34 billion have come into the country as of September 15 in this calendar year. If the same trend continues, then the Foreign Portfolio Flows will hit an all-time record by the end of the year," he said.

"Our market has become more and more dependent on Foreign Portfolio Flows. There has to be a counter balance to that in this country. All other countries have it. If that counter balance is not provided, we run the risk of exodus of money at the happening of a particular global event," Sinha remarked.