Employees Provident Fund Organization (EPFO) has not considered the proposal to increase the equity investment limit from 15 per cent to 20 per cent in its board meeting. The 231st meeting of the Central Board of Trustees was held on Friday and Saturday. At present, up to 15 per cent of the total PF (provident fund) corpus can be invested in equities.
According to a PTI report quoting EPFO trustee Harbhajan Singh Sidhu, the 231st meeting of the Central Board of Trustees on July 29 and 30 did not take a proposal to increase investment in equity or equity-related instruments. It said the proposal was opposed by the employees’ representatives at the EPFO’s executive committee meeting earlier this week.
They were of the view that the proposal should be discussed in more detail before proceeding to revise the investment pattern of EPFO so as to increase the allocation of investable funds in equity related instruments to 20 per cent from the existing 15 per cent. . Its volatile nature of stock markets.
The proposal to revise the limit to 20 per cent has already been revised and approved by EPFO advisory body Finance Audit and Investment Committee (FAIC).
The recommendation of FAIC was to be taken up for consideration and approval by CBT, the apex decision making body of EPFO. Earlier this month, in a written reply in the Lok Sabha, Minister of State for Labor and Employment Rameshwar Teli had said, “The CBT, a sub-committee of the EPF FIAC, has recommended for a proposal to increase investment in equities and related investments. 5-15 per cent to 5-20 per cent in Category IV of investment pattern for consideration of CBT, EPF.
The EPFO started investing in Exchange Traded Funds (ETFs) in August 2015, with 5 per cent of the investible deposits in stock-linked products. For the current financial year, it has been increased to 15 per cent. The trade unions are opposing any investment by the EPFO in the stock markets as these are not backed by government guarantees.
In a written reply, Teli had also said that the estimated return on investment related to EPFO equity increased by 16.27 per cent in 2021-22 to 14.67 per cent in 2020-21. The reply also revealed that EPFO’s notional rate of return on equity related investments was negative at (-) 8.29 per cent in 2019-20 due to the impact of COVID-19.
It has also been said in several media reports that after increasing the equity exposure of the EPFO to 20 percent, it will be increased to 25 percent. If the equity investment limit is increased to 25 per cent, then EPFO can invest Rs 3,000 crore every month in the stock market.
Last month, the government had approved a four-decade low EPF interest rate of 8.1 per cent on Employees’ Provident Fund deposits for 2021-22. About five crore subscribers of EPFO will be affected by this decision.
In March, the retirement fund body had decided to pay an interest rate of 8.1 per cent on the EPF amount for 2021-22, as against 8.5 per cent earlier. The 8.1 per cent EPF interest rate is the lowest since 1977-78, when it was 8 per cent.
(with inputs from PTI)
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