EPFO considers raising equity exposure limit to 25% after interest rate cut
The Employees’ Provident Fund Organization (EPFO) is considering a proposal to increase its equity exposure for higher returns on retirement funds. EPFO is responsible for regulation and management of provident fund in the country.
If reports are to be believed, the EPFO is actively planning to increase equity exposure from 15 per cent to 25 per cent, but in two phases. In the first phase, the cap will be revised to 20 per cent and then to 25 per cent in the second phase.
If the scheme gets the approval of the EPFO Central Board of Trustees (CBT), the proposal will be sent to the Ministry of Finance and Ministry of Labor and Employment for approval.
EPF is primarily considered a debt product. The money is mainly invested in debt products like government securities.
It was in 2015 when EPFO was allowed to start investing in equities for the first time, but with a limit. The statutory body was initially allowed only 5% exposure in equities. In 2017 the limit was raised to 15%.
This development assumes significance as it comes in the backdrop of reducing the interest rate on EPF deposits to 8.1 per cent from 8.5 per cent for 2021-22, the lowest level in more than four decades.
The EPFO’s idea of increasing exposure to stocks is aimed at helping bridge the shortfall in returns.
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