EPFO may buy long-term govt bonds from secondary markets
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Last Updated: Wednesday, December 02, 2009, 15:32
  
New Delhi: The retirement fund manager EPFO will soon be allowed to purchase long-term government bonds with maturity of 10 years or more from the secondary market.

Under the present investment guidelines, the Employees Provident Fund Organisation (EPFO), which manages a corpus of Rs 2.57 lakh crore, can buy only short-term government bonds from the secondary market, except bonds floated by the Reserve Bank.

The EPFO, however, can continue to invest in short-term and long-term bonds in the primary market.

This decision is likely to help the money market as it will push up demand for long-term government bonds.

The decision was taken the Finance and Investment Committee (FIC), the advisory body of the organisation, and will be placed before its apex decision-making body, the Central Board of Trustees (CBT) for approval at its next meeting scheduled for December 5.

It is a general practice that the CBT upholds the recommendations of the FIC. Arguing that the secondary market restrictions are regressive, the FIC had on August 18 suggested appropriate modifications to the investment pattern.

At the August 18 meeting, the FIC had suggested that the restrictions on secondary market purchases of Central government-guaranteed securities with over 10 years tenure be done away with.

The FIC, while recommending the proposal, had pointed out that because of the restrictions, the EPFO was missing out some attractive investment opportunities available in the secondary markets. A notable miss was the bonds from infrastructure finance company IIFCL.

The present investment pattern mandates EPFO to invest up to 15 per cent in government guaranteed instruments.

This category of market instruments includes government securities as defined in Section 2 of the Public Debt Act of 1944, created and issued by any state government and units of such mutual funds which have been set up as dedicated funds for investment in government securities and which have been approved by the Securities and Exchange Board.

EPFO manages a huge retirement fund corpus of Rs 2.57 lakh crore with a subscriber-base about 4.7 crore.

PTI


First Published: Wednesday, December 02, 2009, 15:32


Tag: EPFObondsmarkets
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