EPFO mulls raising investment in stocks to 15 per cent

New Delhi: The board of retirement fund body EPFO is likely to approve the proposal to increase its investment in stocks to 15 per cent of investible deposits in 2017-18, from the current 10 per cent.

"The investment in the Exchange Traded Funds (ETF) can be raised to 15 per cent of the investible deposits in a CBT meeting scheduled tomorrow," a source said.

The Central Board of Trustees, the apex decision making body at EPFO, had deferred a decision on the proposal to increase exposure in ETFs in its last meeting on March 30. The retirement fund body invests part of its investible deposits in stocks through ETFs.

The source said that the revised agenda for the meeting includes the status report on the ETF investment by the EPFO. "While presenting the status report to trustees, the proposal to enhance the investments in the ETF would be mooted and is likely to be approved tomorrow," the source added.

The board may also decide on enhance the wage ceiling for coverage under the EPFO schemes to Rs 25,000 per month from existing Rs 15,000. The EPFO trustees can also discuss the proposal to amend the EPF & MP Act for making provident fund contributions optional for employees in apparel and made-ups sector, the source said.

The EPFO had entered the stock market by investing 5 per cent in August 2015, which was raised to 10 per cent last year. However, trade unions are expected to lodge their protest against putting funds in stock markets in view of volatility
in equity investments.

An EPFO trustee and All India Trade Union Congress Secretary D L Sachdev said, "We have been opposing the investments in stock market. But the government has been investing EPFO money in equity linked scheme despite dissent note by the central trade unions on the issue."

Earlier in 2015, the finance ministry had allowed private provident funds to invest 5-15 per cent of its investible deposits in equity or equity-linked schemes. In view of the volatile nature of stock markets, the EPFO had then decided to start with investing just 5 per cent of its over Rs 1 lakh crore investible amount in ETFs.

The EPFO has invested Rs 18,069 crore in ETFs till February 18, 2017 and yielded a return of 18.13 per cent on these investments. Earlier, Labour Minister Bandaru Dattatreya had indicated that the EPFO will increase its investment in the ETF in the backdrop of good returns.

Besides, the source said that the EPFO trustees can also discuss the proposal to amend the EPF & MP Act for making provident fund contributions optional for employees in apparel and made-ups sector.

The issue was discussed and deferred in the last CBT meeting where the unions had opposed the move saying that it would set a wrong precedent of giving exemption from PF contributions to workers.

The Centre in June last brought a package for the textile and apparel sector which was later extended to made-ups also in December 2016. Among other sops in the package, it was announced that EPF shall be made optional for employees earning less than Rs 15,000 per month in these segments.

However, it was a Cabinet decision but it could not be implemented without amending the EPF & MP Act 1952. The source said that the board can also take the proposal to enhance the wage ceiling for coverage under the EPFO schemes to Rs 25,000 per month from existing Rs 15,000.

It is estimated that this could bring in one crore more workers under the social security schemes run by the EPFO. Meanwhile, the EPFO has extended the last date for submission of life certificate for its over 50 lakh pensioners to April 30, 2017.