EPFO meeting: CBT gives nod to increase investment in ETFs to 15 per cent

The retirement fund body, EPFO, had entered the stock market by investing 5 per cent of its investible deposits in August 2015, which was raised to 10 per cent last year.

Written by Aanchal Magazine | New Delhi | Published:May 28, 2017 2:47 am
epfo, epfo rates, CBT hike, epfo etp, business news, indian express news The retirement fund body, EPFO, had entered the stock market by investing 5 per cent of its investible deposits in August 2015, which was raised to 10 per cent last year. (Source: File Photo)

The Central Board of Trustees (CBT) of Employees’ Provident Fund Organisation (EPFO) approved hiking investment in Exchange Traded Funds (ETFs) to 15 per cent of its investible deposits from the existing 10 per cent. The 15 per cent investment in 2017-18 would be equivalent to around Rs 22,500 crore out of EPFO’s total investible deposits of Rs 1.5 lakh crore, Central Provident Fund Commissioner V P Joy said. “The ETF investment has given good returns, with an annualised return of 13.72 per cent so far. So the decision was taken to hike the investment to 15 per cent for 2017-18,” Joy said over the phone after the 218th meeting of CBT in Pune on Saturday.

The EPFO had started investing in ETFs in 2015. Out of the total ETF investment of Rs 22,800 crore so far, the retirement fund body has earned dividend of around Rs 234 crore, Board members said.

“There was some opposition by some members but broadly there was agreement on the benefits of ETF investment. The dividend of Rs 234 crore will be credited to the rate of interest account and is likely to help at the time of fixing interest rate for 2017-18,” Employees’ representative on CBT and RSS-affiliated Bharatiya Mazdoor Sangh’s Prabhakar J Banasure said. The Rs 234 crore dividend from the total equity-linked investment of the retirement fund body has come from SBI Mutual Fund, which manages around Rs 18,000 crore of the total investment, Banasure said. The rest of the amount is managed by UTI mutual fund, which is yet to give a dividend, he added.

The Board also discussed an exit policy for the equity-linked investment for individuals as suggested by IIM- Bangalore, but no final decision was taken on that. “The exit policy was debated but it has been deferred for the next meeting,” Joy said. “CBT members have asked for more details regarding the (ETF) investment and its resulting gains. It would be taken up in next meeting,” Ramen Pandey, CBT member and President, INTUC said.

The retirement fund body, EPFO, had entered the stock market by investing 5 per cent of its investible deposits in August 2015, which was raised to 10 per cent last year. In 2015, the finance ministry had allowed non-government provident funds to invest up to 15 per cent of its investible deposits in equity or equity-linked schemes.

Though the EPFO had prior approval to invest up to 15 per cent of its investible deposits of around Rs 1 lakh crore a year, it needed the CBT’s approval to raise the investment to 15 per cent. The issue was deferred earlier in the previous meeting of CBT held on April 12.

The Board in its meeting rejected the other proposal to reduce the share of mandatory contribution by employees and employers to 10 per cent each from 12 per cent of the income. Board members said that the proposal was rejected by both employers’ and employers’ representatives as well as state government officials. “Everyone including employers’, employees’ and government representatives rejected the proposal since it was felt it would favour corporates more than workers,” Employees’ representative on CBT and Bharatiya Mazdoor Sangh’s Virjesh Upadhyay said.

The proposal to reduce the contributions by employers and employees to 10 per cent of basic wages, including basic pay and dearness allowance had come up after demands from various quarters that there is a need to hike the present rate of EPF contribution and to bring it at par with other social security schemes, such as the National Pension System (NPS). However, it met with vehement opposition from all trade unions since the time it was initially proposed as they said it would dilute the social security schemes.

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  1. M
    madhukar gupta
    Jun 6, 2017 at 4:56 pm
    declaring Rs 234 core dividend & we are paid only Rs 1000 with no increase. pl, increase minimum pension to Rs 5000 with an increase at the rate of inflation per year. pl pl please immediate increase required in order to survive or by the time we die this pension will hardly have a face value of Re 1. OR dont call it PENSION.
    Reply
  2. M
    madhukar gupta
    Jun 6, 2017 at 4:49 pm
    Earning a dividend of Rs. 234 core, & board is not increasing minimum pension amount from Rs 1000 to 3000. I am getting Rs 1100 from past 10 yrs. with no increase. PL increase with immediate effect or from past 2-3 yrs. We should be given some increase every year or by the time we die it will have a face value of re1 only. pl, listen.
    Reply
  3. R
    rohan
    May 28, 2017 at 12:51 pm
    This Government will never do anything good for the working class. It is a Government by the India Inc. for the benefit of India Inc. The faked CPI/WPI is eroding the real wages of the working cl and the working cl is getting frustrated. The Government was trying to fool the working cl by offering a bait of better take home. But, the plan was to reduce the EPF burden of India Inc. and increase their profitability. CBT has done a right thing in rejection the proposal. But CBT has fallen prey to government’s proposal to increase the share of EPF money in speculative high risk stock markets!
    Reply