The Employees’ Provident Fund Organisation has advanced its decision making on selling shares to August rather than February. The move that will enable the retirement body plan selling of its equity investments better, Economic Times reported.
EPFO was so far taking a decision to offload equity in February and had less than a month to realise the capital gains on the basis of which it declared the rate of interest on PF deposits for the concluding year.
“However, from this year onwards, we will take a decision sometime in August, so that actual offloading can happen over the next six to seven months depending on the stock market conditions,” an official told ET.
EPFO sells equity on the ‘first in, first out’ principle. This means the investments made in equity in the first year are sold in the fourth year. This ensures that the money stays invested for a longer duration and offers better returns.
EPFO started making investments in equities in 2015-16, starting with 5% in the first year, 10% in the second year and 15% 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.
EPFO invests up to 15% of its incremental corpus of ₹1. 5 lakh crore into equity in the form of exchange traded funds, both on the Nifty and Sensex. Its accumulated corpus stands at over ₹16 lakh crore now and it has nearly 60 million subscribers to it.
The government is of the view that to be able to give 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 that on debt instruments.
EPFO is crediting the interest at the rate of 8. 1% for 2021-22 into its subscribers’ accounts, which is the lowest in more than four decades.
It had credited 8. 5% in 2020-21 and 2019-20, and 8. 0% as interest rate in 1977-78. Since then, it has been either 8. 25% or more.