scorecardresearchEPFO Equity Investment Limit Hike: Proposal to hike equity investment limit

EPFO Equity Investment Limit Hike: Proposal to hike equity investment limit to 20% not taken up in EPFO trustees meet

Updated: 31 Jul 2022, 08:05 AM IST
TL;DR.

EPFO trustee Harbhajan Singh Sidhu said, the proposal to enhance investment in equity or equity-related instruments was not taken up in the Central Board of Trustees 231st meeting on July 29 and 30.

Wage ceiling under the EPFO has been revised only eight times since the inception of the scheme in 1952.

Wage ceiling under the EPFO has been revised only eight times since the inception of the scheme in 1952.

(PTI) Retirement fund body EPFO has not taken up the proposal to hike the investment limit in equities to 20 per cent from the existing 15 per cent, following demand for more deliberation from employees' representatives in its trustees' meet.

Talking to PTI, EPFO trustee Harbhajan Singh Sidhu said, "The proposal to enhance investment in equity or equity-related instruments was not taken up in the Central Board of Trustees 231st meeting on July 29 and 30".

Sidhu informed that the proposal was opposed by employees' representatives in the executive committee meeting of the Employees Provident Fund Organisation (EPFO) earlier this week.

He was of the view that there should be more detailed deliberation on the proposal before going ahead to amend the EPFO's pattern of investment to increase the allocation of investible funds in equity-related instruments to 20 per cent from the existing 15 per cent in view of its volatile nature of the stock markets.

As per the revised agenda of the 231st CBT meeting, the proposal to hike investment in equity or related schemes was withdrawn.

At present, EPFO can invest 5 to 15 per cent of the investible deposits in equity or equity-related schemes.

The proposal to revise the limit to 20 per cent has been vetted and approved by the EPFO advisory body Finance Audit and Investment Committee (FAIC).

The recommendation of FAIC was to be taken up by the EPFO apex decision-making body CBT for consideration and approval.

Earlier this month, in a written reply to the Lok Sabha, Minister of State for Labour and Employment Rameshwar Teli had said, "FIAC, a sub-committee of CBT, EPF, has recommended for the proposal to increase investment in equity and related investments in category IV of the Pattern of Investment from 5-15 per cent to 5-20 per cent for consideration of CBT, EPF".

The EPFO started investing in Exchange Traded Funds (ETFs) in August 2015, putting 5 per cent of its investible deposits in stock-linked products. It was raised to 15 per cent for the current fiscal.

Trade unions have been opposing any investment in stock markets by the EPFO as these are not backed by the government guarantee.

In the written reply, Teli had also said the notional return on EPFO equity-related investments rose 16.27 per cent in 2021-22 from 14.67 per cent in 2020-21.

The reply also showed that the notional rate of return on equity-related investment of the EPFO was negative at (-) 8.29 per cent in 2019-20 due to the impact of COVID-19.

First Published: 31 Jul 2022, 08:05 AM IST