If labour ministry has its way, 15 percent of the entire corpus of the Employees’ Provident Fund Organisation (EPFO) will be invested into equity, the Economic Times reported.
If approved, this would translate into ₹2.25 lakh crore of the provident fund money going into the stock market over the next few years, a top government official told the paper.
Currently, EPFO invests 15% of its annual incremental inflow of about ₹1. 5 lakh crore into equity through exchange traded funds (ETFs). Its accumulated corpus stands at over ₹15 lakh crore now and it has nearly 60 million subscribers.
There is also a proposal to increase the equity investment limit from 15% of the incremental inflow to 20% and then to 25% over the next few years. Even the Finance Investment and Audit Committee (FIAC) has vouched for this.
“Higher returns involve higher risks. So, we have to look at ways to continue getting higher returns on PF deposits,” the official was quoted as saying in the report. The investment pattern notified by the finance ministry allows EPFO to invest up to 15% of its incremental inflow into equity.
The proposals could be laid before the EPFO’s central board of trustees at its meeting on July 29-30.
The government believes that to offer higher returns on PF deposits on a sustainable basis year after year, it is important that the retirement fund body invests more in equity as long-term returns on such investments are nearly double than on bonds and debt instruments, which currently constitute 85% of EPFO’s investment.
EPFO started investing in equities in 2015-16. It started with 5 percent of its annual incremental inflow in the first year, 10 percent in the second year and 15 percent in the subsequent years.
It has made a cumulative investment of ₹1. 7 lakh crore, out of which over ₹ 22,000 crore have been redeemed till March 31, 2022.