EPFO likely to increase equity investment limit to 20%: Report

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Employees’ Provident Fund Organization (EPFO) is likely to adopt a proposal this month to increase its equity investments from the present limit of 15% to up to 20% of the investible deposits. According to a source, the idea is anticipated to be discussed and approved during the EPFO trustees’ meeting set for July 29 and 30. The retirement fund body currently has the option to invest 5-15% of the investable deposits in equity-related or equity-related schemes.

The Finance Audit and Investment Committee, an advisory body to the EPFO, has examined and approved the request to change the maximum to 20%. (FAIC). The EPFO’s top decision-making body, the Central Board of Trustees (CBT), will review and approve the FAIC’s recommendation.

“The Central Board of Trustees (CBT) headed by the Union Labour Minister is likely to approve the recommendation of the FAIC for increasing the investment in equity and equity related schemes to 5-20%from existing 5-15%,” the source said.

In a written reply to Lok Sabha on Monday, Minister of State for Labour and Employment Rameshwar Teli said, “FIAC, a sub-committee of CBT, EPF, has recommended for the proposal to increase investment in equity and related investments in category IV of the Pattern of Investment from 5-15 per cent to 5-20 per cent for consideration of CBT, EPF.” EPFO had started investing in Exchange Traded Funds (ETFs) in August 2015, putting 5%of its investible deposits in stock-linked products. It was raised to 15 per cent for the current fiscal.

Since stock markets are not supported by a government guarantee, trade unions have opposed any investments by EPFO in them. The notional return on EPFO equity-related investments increased from 14.67% in 2020–21 to 16.27% in 2021–22, according to Teli’s written response.

The response also revealed that COVID-19’s effects caused the EPFO’s notional rate of return on equity-related investments to be negative in 2019–20, at (–) 8.29 percent. According to the ministry, EPFO resolved 2,88,15,498 requests from subscribers for withdrawals of 1,04,959.18 crore in 2021–2022.

In 2020–21, EPFO settled 2,33,90,550 claims totaling 91,187.54 crore. A total of 70,202,34 crore was withheld in 2019–20 under 1,28,77,354 claims that the EPFO had resolved.

(With PTI inputs)

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