Retirement Fund Body EPFO To Increase Equities' Investment Limit To 20%: Report

Retirement fund body EPFO is likely to approve this month a proposal to enhance its investments in equities to up to 20 per cent of the investible deposits from the current limit of 15 per cent.

According to a source, the proposal is expected to be considered and approved during the EPFO trustees' meeting scheduled to be held on July 29 and 30.

Currently, EPFO can invest 5 to 15 per cent of the investible deposits in equity or equity-related schemes.

The proposal to revise the limit to 20 per cent has been vetted and approved by the Employees' Provident Fund Organisation's (EPFO) advisory body, the Finance Audit and Investment Committee (FAIC).

The recommendation of FAIC will be placed before the EPFO apex decision-making body -- Central Board of Trustees (CBT) -- for consideration and approval.

"The Central Board of Trustees (CBT) headed by Union Labour Minister is likely to approve the recommendation of the FAIC for increasing the investment in equity and equity related scheme to 5-20 per cent from existing 5-15 per cent," 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 started investing in Exchange Traded Funds (ETFs) in August 2015, putting 5 per cent of its investible deposits in stock-linked products. It was raised to 15 per cent for the current fiscal.

Trade unions have been opposing any investment in stock markets by EPFO as a government guarantee does not back these.

In the written reply, Mr Teli also said the notional return on EPFO equity-related investments rose 16.27 per cent in 2021-22 from 14.67 per cent in 2020-21.

The reply also showed that the national rate of return on equity-related investment of the EPFO was negative at (-) 8.29 per cent in 2019-20 due to the impact of COVID-19.

In 2021-22, the minister said EPFO settled 2,88,15,498 claims for withdrawal of Rs 1,04,959.18 crore by the subscribers.

EPFO had settled 2,33,90,550 claims for withdrawal of Rs 91,187.54 crore in 2020-21. The withdrawal amount was Rs 70,202.34 crore in 2019-20 under 1,28,77,354 claims settled by the EPFO.