The finance committee of the Central Board of Trustees (CBT), the highest decision-making body of the Employees’ Provident Fund Organisation (EPFO), has suggested raising EPF exposure in equities to 20% of the fresh annual accretions from the present cap of 15%, the government informed Parliament on Monday.

The CBT is likely to meet on July 29-30 here to consider the recommendation. 

“The Finance Investment and Audit Committee (FIAC)… has recommended increase (in) investment in equity and related investments in category IV of the Pattern of Investment from 5-15% to 5-20% for consideration of CBT,” minister of state for labour and employment Rameshwar Teli said replying to a written question in Lok Sabha.

EPFO manages a Rs 17-trillion corpus and maintains over 240 million accounts pertaining to its members. It gets about Rs 2.3 trillion from around 6.5 million active subscribers annually.

Sources said, in view of the falling income from its investment which forced EPFO to declare an over four-decade low of 8.1% interest on provident fund deposits for 2021-22, the FIAC at its meeting in May discussed raising the investment ceiling in equities by 5% to ensure higher returns for EPF members.

Generally, FIAC’s recommendations are vetted by the CBT which then sends these to the finance ministry for its approval. As per the current investment pattern, EPFO invests between 45% and 65% in government securities, between 20-45% in debt instruments, up to 5% in short-term debt instruments, up to 15% in equities, up to 5% in asset-backed, trust-structured and miscellaneous investments.

EPFO invests equities in the form of exchange traded funds (ETFS) both Nifty and Sensex. It started investing in ETFs with effect from August 5, 2015, initially with 5% of the annual investments. At its September 2016 meeting, the CBT enhanced the allocation to 10% and in 2017, the threshold was further raised to 15%.

In 2020-21, EPFO made Rs 32,071-crore investment in ETFs. Cumulatively, it made a total of Rs 1.38-trillion investment. However, it redeemed some investment at various points and as on March 2021, EPFO’s existing investment was Rs 1.23 trillion.

The notional return on investment from EPFO’s equity investment was 16.27%, as on March 2022.

To another question, Teli said members withdrew a little over Rs 1 trillion from the fund last fiscal, up from Rs 91,000 crore a year ago. In FY22, EPFO settled 28.8 million claims compared with 23.4 million a year earlier.