EPFO may increase equity investment limit to 25%
At its next board meeting next month, the Employees’ provident fund (EPFO) should consider increasing its equity investment limit by 15% to 25%according to people close to the situation.
They said the board could address administrative concerns as well as continue discussions and finalize recommendations from the four EPFO subcommittees.
These four sub-committees of EPFO are responsible for setting up EPFO, prospective enforcement of the Social Security Code, building digital capabilities, and pension concerns.
EPFO central board (CBT) will meet for the 231st time on July 8 and 9 in Bangaloreaccording to the pension fund authority.
The CBT is headed by the Minister of Labor and includes members from businesses, employees, and federal and state governments. EPFO has not yet released the agenda for the meeting.
At its meeting last month, the Finance, Investment and Audit Committee (FIAC), a sub-committee of the CBT, proposed raising the equity investment cap in two equal tranches of 5% each. to provide higher returns to ETH participants.
The sharp drop in the interest rate on PF deposits to 8.1% for 2021-2022, compared to 8.5% the previous year, is the cause.
“At the last FIAC meeting, many opportunities and choices, including the possibility of removing the barrier to equity investment, were considered. However, no judgment has yet been made because we need more information,” said KE Raghunathan, member of both FIAC and CBT.
“A day before next month’s CBT, the committee will meet to discuss the matter further.” Due to the lack of a government-backed guarantee on such investments, the proposal to boost equity investments could meet with strong opposition from trade unions.
It would also force the Ministry of Finance to change its investment strategy, which now allows EPFO to invest up to 15% of its additional income in the stock market.