EPFO mulls increasing equity investment limit to 25% to bridge shortfall

view original post

Earlier on Saturday, the government approved 8.1% rate of interest on EPF deposits for 2021-22, which is an over four-decade low, for about 50 million subscribers of EPFO

Topics
EPFO | Employees Provident Fund | savings

BS Web Team  |  New Delhi 

Last Updated at June 6, 2022 09:18 IST

The Employees’ Provident Fund Organisation (EPFO) is considering a proposal to increase its investment limit in equities to 25 per cent of incremental flows from the existing 15 per cent, according to a report in the Economic Times. The equity investment will be first raised to 20 per cent and then to 25 per cent in the second phase.

Earlier on Saturday, the government approved 8.1 per cent rate of interest on EPF deposits for 2021-22, which is an over four-decade low, for about 50 million subscribers of .

EPFO’s idea to gain higher exposure in stocks seems to be aimed at helping bridge the shortfall in returns with investment in debt securities

According to the report in ET, the Finance Investment and Audit Committee met two weeks ago to discuss the matter of investment in stocks. The report said that the proposal will be taken up in June last week at a meeting of the Central Board of Trustees (CBT). The recommendation will be sent to the labour ministry and finance ministry for final approval.

invests about Rs 1,800-2,000 crore in certain exchange-traded funds at its current level of 15 per cent. According to ET report, the EPFO gets total flows of Rs 600 crore every day on average and uses around Rs 200 crore to settle claims. EPFO officials have met mutual fund managers to assess the possibility of investing in equity schemes.

The current 8.1 per cent EPF rate of interest is the lowest since 1977-78, when it stood at 8 per cent. The 8.5 per cent interest rate on EPF deposits for 2020-21 was decided by the CBT in March 2021. It was ratified by the finance ministry in October 2021. Thereafter, the EPFO issued directions to field offices to credit the interest income at 8.5 per cent for 2020-21 into the subscribers’ account.

Dear Reader,

Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor

First Published: Mon, June 06 2022. 09:18 IST