FinMin wants EPFO to invest 3-5% funds in stocks index
New Delhi: The government has asked the
Employees Provident Fund Organisation to begin parking three
to five percent of its subscribers` retirement funds in
stocks for better returns -- a move that would also increase
flow of funds to capital markets by up to Rs 13,000 crore.
The suggestion was made by Finance Ministry Joint
Secretary K P Krishnan at a recent meeting of the Central
Board of Trustees, the apex decision making body of the EPFO.
Krishnan told the Trustees that EPFO could begin by
parking three to five per cent of its corpus in stocks, if the
CBT members had reservations about investing in equities.
He further said that long-term investments in stock
indices would generate healthy returns to the EPFO with
Agreeing with Krishnan, the then Labour Secretary Sudha
Pillai had asked the Finance Ministry to prepare a detailed
note on investment in stocks to help the EPFO Trustees to take
a final view.
The EPFO, which manages provident fund accounts of about
4.5 crore subscribers, has a corpus of Rs 2.57 lakh crore.
The Finance Ministry`s note on investment would be
considered by the Finance and Investment Committee (FIC), an
advisory body of the EPFO, at its meeting on August 18.
The recommendations of the Committee are usually accepted
by the CBT, which is headed by the Labour Minister and has the
authority to take policy decisions.
Earlier, the FIC had turned down the Finance Ministry`s
proposal of parking up to 15 percent of its funds in stocks.
The FIC`s opposition was in view of the volatility witnessed
in the stock markets.
The Finance Ministry in August last year had suggested a
new investment pattern to the EPFO under which it could park
up to 15 percent of its funds in companies listed on Bombay
Stock Exchange and National Stock Exchange and also equity
linked schemes of Sebi-regulated Mutual Funds.
The Finance Ministry came out with the new investment
pattern in August, 2008 after EPFO allowed private players
HSBC, Reliance Capital and ICICI Prudential to manage the
incremental funds of EPFO in July last year. The EPFO had
also selected the country`s largest public sector bank State
Bank of India for the purpose.
Considering the volatile nature of stock markets, EPFO
has not invested in stock markets so far.
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