ESIC to invest in ETFs, start with 5% of surplus funds, take it up to 15% | The Financial Express

ESIC to invest in ETFs, start with 5% of surplus funds, take it up to 15%

The decision was taken at the 189th meeting of the ESIC, chaired by Union minister of labour and employment Bhupender Yadav, on Sunday.

ESIC to invest in ETFs, start with 5% of surplus funds, take it up to 15%
The ESIC will initially start with an investment of 5% and will gradually increase it to upto 15% after review of two quarters.

The Employees’ State Insurance Corporation will now be able to invest its surplus funds in equities but only through exchange traded funds.

The decision was taken at the 189th meeting of the ESIC, chaired by Union minister of labour and employment Bhupender Yadav, on Sunday.

The ESIC will initially start with an investment of 5% and will gradually increase it to upto 15% after review of two quarters.

According to the decision, the investment will be confined in Exchanged Traded Funds, that is Nifty50 and Sensex.

“It will be managed by Fund Managers of asset management companies,” said an official statement, adding that the equity investment will be monitored by existing custodian, external concurrent auditor and consultant looking after the debt investments in addition to the management of ETF for equity.

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The decision was taken to invest in ETFs was taken “due to the relatively low returns on debt instruments coupled with the need to diversify,” the release further explained.

As on March 31, 2020, the ESIC had an investment corpus of Rs 1.07 trillion and is estimated to be close to Rs 1.3 trillion at present. Of this about, Rs 26,171 crore was earmarked as reserve fund while the balance was parked in banks’ fixed deposits of banks, a special deposit with the central government and other instruments based on its investment norms.

The ESI corpus is funded through contributions amounting to 4% of the salary of workers earning up to Rs 21,000 a month, with 3.25% of the salary contributed by employers and the balance deducted from employees’ wages. As on March 31, 2022, the ESIC had 35 million insured persons eligible for benefits.

Unlike the Employees’ Provident Fund Organisation, the ESIC has not invested in equities till now.

At the meeting, the Annual Accounts of the ESIC for the year 2021-22 along with the report of the CAG and Annual Report of ESI Corporation for the year 2021-22 along with its analysis were approved and adopted by the Corporation. “It will now be laid in the Parliament after approval of the Ministry of Labour and Employment,” said the statement.

The ESI Corporation also approved the proposal to start PhD, MDS, nursing and paramedical courses in its medical institutions spread across country.

Acknowledging the considerable increase in the number of Insured Workers and their dependents coming under the ambit of ESI Scheme, the Labour Minister also asked ESIC to focus on strengthening and modernising infrastructure.

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First published on: 05-12-2022 at 03:30 IST