Kamal Ghorui
NEW DELHI: The Employees’ Provident Fund Organisation (EPFO) exposure to the equity market has for the first time reached 10%, as the retirement fund body looks for avenues to augment its income to sustain the persistent high annual returns amid falling govt bond yields, where nearly 85% of its investible corpus is parked.“EPFO is allowed to invest its fresh accretions only into the equity market. We remain committed to investing more in equities and the 10% threshold has just been reached,” an official told TOI. The retirement fund body is currently allowed to invest up to 15% of the fresh flows into equities.For FY25, EPFO had declared an interest rate of 8.25% on members’ EPF balances, while the average yield on 10-year govt securities was 6.86%. The Nifty50 and BSE sensex returned 5.3% and 5.1%, respectively.
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EPFO invests in the equity market only through exchange traded funds (ETFs) based on the S&P BSE sensex and National Stock Exchange Nifty50 and started investing 5% of fresh accretions in Aug 2015. Among the latest reforms, it had approved reinvesting 50% of its ETF redemption proceeds back into the equity market and increased the redemption period from four years to seven years.This comes amid last year’s advisory by RBI, suggesting a series of measures to “improve” EPFO’s investment management and accounting practices as it is the custodian of retirement savings worth more than Rs 25 lakh crore, belonging to around 30 crore workers.“RBI suggested a very dynamic pattern of investment. They are of the view that EPFO should churn its debt portfolio and invest more in equities at a time so that they can yield higher returns in the next cycle. This calls for quite a robust management of the corpus,” the official added.EPFO has also appointed IIM Kozhikode to examine its equity exit policy and the interest stabilisation reserve. A high-powered committee has been set up to study RBI’s suggestions on investment management, along with training sessions in consultation with Crisil.
