Proposal to increase equity investment limit not considered at EPFO Trustees meeting
Pension fund body EPFO did not accept the proposal to raise the ceiling for equity investment to 20% from the current 15%, following the request for further deliberations from employee representatives at the meeting. of its directors.
Speaking to PTI, EPFO Administrator Harbhajan Singh Sidhu said: “The proposal to increase investments in equity or equity-related instruments was not discussed at the 231st meeting of the Central Board of Directors on July 29 and 30″.
Sidhu informed that the proposal met with opposition from employee representatives during the Employees Provident Fund Organization (EPFO) executive committee meeting earlier this week.
He was of the view that there should be further deliberations on the proposal before moving forward to amend the EPFO investment scheme to increase the allocation of investable funds into instruments. linked to equities at 20% compared to the existing 15%, given its volatile nature of the stock markets.
In accordance with the revised agenda of the 231st meeting of the CBT, the proposal to increase investments in equities or related schemes has been withdrawn.
Currently, EPFO can invest 5 to 15 percent of investable deposits in equity or equity-linked funds.
The proposal to revise the limit to 20% has been reviewed and approved by the advisory body of the EPFO Finance Audit and Investment Committee (FAIC).
The FAIC’s recommendation was to be taken up by EPFO’s apex decision-making body, the CBT, for review and approval.
Earlier this month, in a written response to the Lok Sabha, Minister of State for Labor and Employment Rameshwar Teli said: “FIAC, a sub-committee of CBT, EPF, has recommended for the proposal to increase equity and related investments in Category IV of the Investment Scheme from 5-15 percent to 5-20 percent for CBT, EPF review.”
EPFO began investing in exchange-traded funds (ETFs) in August 2015, placing 5% of its investable deposits in equity-linked products. It has been increased to 15% for the current financial year.
Unions have opposed any investment in stock markets by EPFO as these are not backed by government guarantee.
In the written response, Teli had also said that the theoretical return on investments linked to EPFO shares had increased by 16.27% in 2021-22, compared to 14.67% in 2020-21.
The response also showed that the notional rate of return on investments linked to EPFO shares was negative at (-) 8.29% in 2019-2020 due to the impact of COVID-19.