Hope EPFO raises equity investment to 15%: Sinha

NEW DELHI: Minister of state for finance Jayant Sinha on Thursday proposed increasing the proportion of assets that pension fund Employees’ Provident Fund organisation (EPFO) invest in equity markets to 15% from the current 5%, saying this could help reduce volatility.

“Hopefully over a period of time they bring it up to 15%,” Sinha said at the India Economic Convention, organised by industry body Ficci.

Sinha cautioned that if Indian equity markets continue to be volatile, the cost of capital would stay high, affecting small busi- nesses. “The financial system works well for large businesses,” he said.

EPFO had last month said it would invest 5% of its annual inflows, totalling about ` 5,000 crore, in the stock market, targeting up to ` 15,000 crore next year. EPFO is mandated to invest a minimum 5% of its investible corpus in equities, with a ceiling of 15%.

Last week Pension Fund Regulatory and Development Authority chairman Hemant Contractor had suggested raising the exposure of pension funds in equities to as much as 50%.

Reserve Bank of India deputy governor Urjit Patel, also speaking at the India Economic Convention, said sustained low inflation is an important factor in reducing the cost of the capital. “It is not inflation last week or last month but mediumto long-term inflation,” he said.

Patel said factors such as fiscal deficit of both the Central and state governments and higher cost of debt restructuring were raising the cost of funds.

“The higher the cost of restructuring, the higher the cost of debt workout and the more it builds into the cost of lending. This is something we are addressing,” Patel said.

Minister of commerce and industry Nirmala Sitharaman said cautioned on flight of domestic capital.