EPFO EXPOSURE TO EQUITIES DOUBLED
Investment to be raised to ~13,000 cr without CBT nod
Brushing aside opposition from unions, the labour ministry on Thursday doubled Employees’ Provident Fund Organisation’s investment limit in exchange-traded funds (ETFs) to 10 per cent. This will result in ~13,000 crore of the retirement fund body flowing into stock markets in the current financial year. EPFO has already invested ~1,500 crore in ETFs in the first half of the current financial year and will invest about ~11,500 crore in the remaining six months.
The Union labour ministry on Thursday decided to hike the exposure of the Employees’ Provident Fund’s incremental corpus in equity markets from five per cent to 10 per cent for the current financial year, without consulting the Central Board of Trustees (CBT).
The decision, which will entail a total investment of ~13,000 crore in the equity market from the retirement fund body, sparked angry reaction from trade unions as it is rare for the ministry to not go to the CBT for decisions about EPF.
CBT is apex decision-making body of EPF Organisation (EPFO).
“All over the world, social security funds’ equity participation is 30 per cent. The Ministry of Finance has given permission to invest up to 15 per cent. Some CBT members have reservations, not the entire CBT. This decision is final with immediate effect,” said Union Labour Minister Bandaru Dattatreya.
Till now, the EPFO had invested five per cent of the incremental inflows in exchange-traded funds.
The increase in investment in equities is on account of better returns, Dattatreya said.
The return on the equity investments in the past year had been 13.24 per cent, he said. Of the total amount, 75 per cent was being invested in the Nifty and the remaining 25 per cent in the BSE.
As the government did not take approval from CBT, trade unions expressed displeasure.
“This is undermining of a statutory body. All central trade unions will oppose it,” said D L Sachdeva, national secretary of the All India Trade Union Congress.