In order to make the most out of the surge that equity markets are observing of late, retirement fund body Employees’ Provident Fund Organisation (EPFO) is planning to monetise its investment made in Exchange Traded Funds (ETFs). It has been over two years since the EPFO has started to invest in the equity-linked instruments. As per a report by The Indian Express, the proposal to invest in these instruments will be up for consideration in the EPFO’s Central Board of Trustees’ meeting scheduled later in January. There are as many as 4.5 crore members in the EPFO currently. In November last year, the retirement fund body Employees’ Provident Fund Organisation (EPFO) announced that the proposal to credit exchange traded fund (ETF) units to provident fund accounts has been cleared. However, account holders will be able to see them reflected in their PF accounts by March-end next year. This change was effected in EPFO after consulting IIM Bangalore and will alter accounting policy for valuation and accounting of equity investments, Labour Minister Santosh Gangwar said in New Delhi. The decision was earlier cleared by the apex decision making body Central Board of Trustees (CBT) and this accounting policy change also incorporated observations of the Comptroller and Auditor General (CAG). EPFO began investing its funds in exchange-traded funds in August 2015.
If the proposal sees the light of the day early next year, the finalisation of EPF interest rate for 2017-18 will also observe a bearing, two unidentified senior government officials told The Indian Express. “We have to prepare the software that will probably get completed by March and we will start crediting the accounts with units from April…based on that we have to rework our policy on offloading the ETF. There’s no point in sitting on it. We have to sell it in the market. Only then the actual physical cash will come to us because as of now whatever ETF we have invested is in the name of the EPF, the units have not been credited to the individual accounts. It’s a consolidated ETF in the name of EPFO a notional thing. We need to offload in the market or have a sort of a plan as to how we will offload it, whether at 15 percent return or 20 percent return, or whatever it is, that has to be worked out. That is being worked upon and then it will be taken to CBT for its approval, which should be probably in the second week of January,” the sources told.
The CBT, in its last meeting, had approved an accounting and disbursing mechanism for the equity-linked investments to enable its 4.5 crore subscribers to track and redeem at market price the portion of their Provident Fund money invested in equity shares.