New Delhi: The Employees Provident Fund
Organisation`s key advisory body, Finance and Investment
Committee, would meet next month to take a view on parking 3
to 5 percent of its large corpus of Rs 2.57 lakh crore in the
Asked whether the Committee would take a view on
investing a part of the provident fund corpus in the stock
market, a senior labour ministry official said, "The Finance
and Investment Committee is meeting on October 8. The agenda
will be finalised shortly."
EPFO sources said the issue has been pending for long
and it is most likely to be discussed at the committee meeting
scheduled next month.
The proposal, if approved, would result in Rs 13,000
crore flowing into the stock markets.
After evaluating the proposal, the FIC would make
necessary recommendations to the EPFO`s apex body, the Central
Board of Trustees (CBT), for the final decision. It is a
general practice that FIC recommendations are accepted by CBT.
At a recent meeting of the FIC on August 18, an EPFO
official favoured parking 3-5 percent of the funds in stock
market through a detailed presentation. "Index-based strategy
for investment in equities would be most suitable for EPFO`s
need", he had said.
During the meeting of FIC, it was felt that alternative
avenues are a must to enhance or maintain overall returns to
subscribers as fixed-income products would, as in the
developed economies, lessen in future.
Investment in equities provide a good hedge against
inflation, unlike fixed income securities, the EPFO official
had said in the presentation. That means equities investment
is better than fixed income securities.
The EPFO has not invested in stock markets so far.
This July, the CBT had dumped the proposal of parking up
to 15 percent of its funds in equities under a new investment
pattern suggested by the Finance Ministry in August last year.
KP Krishnan, Joint Secretary in the Finance Ministry,
then told the Trustees that EPFO could begin by parking 3-5
percent of corpus in stock index, if the CBT members had
reservations about investing in equities.
Krishnan had also said long-term investments in the
stock index would generate healthy returns to the EPFO with
Earlier in March this year, the FIC had also turned down
the Finance Ministry`s proposal of parking up to 15 percent
EPFO funds in companies listed on the Bombay Stock Exchange
and the National Stock Exchange, and also the equity-linked
schemes of Sebi-regulated Mutual Funds.