Sebi chairman wants provident fund money to flow to stock markets
25 September 2014
Capital market regulator Securities and Exchange Board of India (Sebi) today called upon pension funds in India to enter the stock market to reap benefits like foreign equity and pension funds.
While employees and workers in other nations reap benefits of India's buoyant equity market through heavy inflows from foreign portfolio investors and pension funds, the provident funds of workers in India are kept out of the market, he rued.
Sebi expressed concern about organisations like Employees Provident Fund Organisation (EPFO) not exercising their mandate and funds to participate in the financial markets, thereby denying employees attractive returns.
''Talking about reforms in the context of those who have the mandate and funds but who are not letting their funds being used in the financial markets, the biggest example is EPFO. It has the size of more than Rs7,00,000 crore with annual accretion of more than Rs70,000 crore. But we are not getting pension money in the equities market, this is a big worry,'' said Sebi chairman U K Sinha.
Of the over $34 billion dollar of foreign portfolio inflows into India between 1 January and 15 September, a major portion is from pension funds outside India. This year, this foreign portfolio inflow is expected to touch all time high.
Speaking at a seminar on 'Financing For Economic Growth: A Policy Roadmap', Sinha maintained that even in a communist nation or a country with 100 per cent capitalist orientation, worker's pension money is invested in the securities market.
''There is a provision from union ministry of finance that up to 15 per cent (of pension funds) can be invested into equity market - 5 per cent direct and 10 per cent through mutual funds. Unfortunately there has been no forward movement,'' he said.
He called for structural reform in this direction and said it is also important as the Indian market is becoming more and more dependent on foreign portfolio flows. ''There has to be a counter balance to that. If that counter balance is not provided, we run the risk of exodus of money. We have to think in terms of allowing long term pension money into the market,'' he added.