EPFO doubles equity portfolio, to invest Rs13,000 cr in stock markets this fiscal

The labour ministry has doubled equity investment limit of Employees Provident Fund Organisation (EPFO) to 10 per cent from the existing five per cent citing a 12.1 per cent return in the first year on investing in exchange traded funds (ETFs).

Accordingly, EPFO will invest 10 per cent of its annual incremental deposits or an estimated Rs13,000 crore in the current fiscal in these funds.

Trade unions representing subscribers to the EPFO have, however, opposed the move, questioning the manner in which the government raised the cap on equity exposure.

As per the notified investment pattern, the retirement fund body can invest up to 15 per cent of its incremental deposits in the stock market. However, EPFO has been held back from increasing exposure to stock market due to continuing opposition by trade unions.

"We have already issued a notification raising the EPFO investment limit of ETFs to 10 per cent from the current 5 per cen of its investible deposits considering the good economic situation," labour minister Bandaru Dattatreya told reporters at a press conference in New Delhi.

EPFO has already invested Rs1,500 crore in ETFs in the first half of the current fiscal and will invest about Rs11,500 crore in the remaining six months.

On the issue of EPFO trustees' approval for such investment, Dattatreya said, "The issue was discussed twice in the CBT meeting. Some members had reservations against the ETF investments. It is the bounded duty of EPFO to ensure that the money is wisely invested and good returns are given to the subscribers."

Labour secretary Shankar Aggarwal, however, said the labour ministry can overrule the CPFO's Central Board of Trustees. "Government (Labour Ministry) is over and above the board."

If the CBT is not able to take decision on a issue then the labour ministry is appropriate authority, as per law (EPF Act), to take a decision for the benefit of the workers, he added.
 
Trade unions, however, sees the labour ministry move as ''unilateral' and have questioned the haste in which the government issued the notification without discussing it with EPFO trustees.

Unions are opposed to EPFO investments in volatile stock markets that cold even wipe out the entire funds with the retirement body in one stroke.

The Modi government, however, wants to do all it could to cater to the interest of investors – productive or non-productive.