The investment pattern for the retirement fund body in this regard is likely to be notified soon by the Labour Ministry, a senior government official said today.
Finance Minister Arun Jaitley in the budget proposed a new investment pattern under which the EPFO would invest a minimum of 5 per cent of its investable funds into equity and equity related schemes.
"We will notify the investment pattern soon. Over a period of time, it makes sense to invest in equity. Investment in a basket of portfolio is safe. All over the world, experience is that equity investment has given the highest returns, the Labour Ministry official said.
"What we are thinking is that we will start with 1 per cent and will go up to 5 per cent. We will review and gradually increase the investment limit," the official said.
The official was talking to reporters on the sidelines of a meeting of Central Board Of Trustees (CBT), Employees' Provident Fund Organisation (EPFO) and Tripartite Consultation on Comprehensive Amendments to the Employees' Provident Funds & Miscellaneous Provisions Act, 1952.
Trade unions have opposed any move to invest EPFO fund in capital market, CITU president A K Padmanabhan said.
As per the mandate given by Finance Ministry, investment in equity and related instruments could be up to 15 per cent of total funds.
Labour Minister Bandaru Dattatreya said based on today's views and apprehensions, the ministry will discuss with appropriate authorities to dispel the apprehensions expressed by stakeholders.
During the meeting, EPFO Central Provident Fund Commissioner K K Jalan said the central government can decide the pattern of investment of fund.
"Central government is 100 per cent competent as regards the investment guidelines of any provident fund in the country. The pattern of investment is to be determined by the government. We are not putting 100 per cent of the money in equity.
"At the first, 1 per cent and then review, then 2 per cent and review and try to reach 5 per cent. We are going very-very gradually. The feeling is that the economy will go better. So we can consider our investment in ETF (exchange traded funds) or economy," Jalan said.
"We will shortly notify the new investment pattern for EPFO," Labour Secretary Shankar Agarwal said on Tuesday . This will mean EPFO having to invest up to 5% of its estimated incremental income . 1.5 lakh crore in of ` exchange-traded funds, seen as an indirect and passive investment in equity .The decision comes after EPFO's Finance Investment & Audit Committee clarified that the government has the right to set the investment pattern.
Trade union leaders say this puts workers' money at risk owing to the volatility in the stock market.
The finance ministry had on March 2 notified the new investment pattern for non-government provident funds, superannuation funds and gratuity funds, allowing them to park 5-15% of their investible funds in equity and equity-related instruments. This is in line with the recommendations of the GN Bajpai-led committee on pensions and is expected to provide long-term resources to productive sectors, besides giving greater flexibility to subscribers to maximise returns. The new investment pattern takes effect from April 1.
Palash Biswas
Full story as follows.
New Delhi Our Bureau |
"We will shortly notify the new investment pattern for EPFO," Labour Secretary Shankar Agarwal said on Tuesday . This will mean EPFO having to invest up to 5% of its estimated incremental income . 1.5 lakh crore in of ` exchange-traded funds, seen as an indirect and passive investment in equity .The decision comes after EPFO's Finance Investment & Audit Committee clarified that the government has the right to set the investment pattern.
Trade union leaders say this puts workers' money at risk owing to the volatility in the stock market.
The finance ministry had on March 2 notified the new investment pattern for non-government provident funds, superannuation funds and gratuity funds, allowing them to park 5-15% of their investible funds in equity and equity-related instruments. This is in line with the recommendations of the GN Bajpai-led committee on pensions and is expected to provide long-term resources to productive sectors, besides giving greater flexibility to subscribers to maximise returns. The new investment pattern takes effect from April 1.
The labour ministry has in the past notified its own investment pattern for EPFO, taking into account the views of its Central Board of Trustees (CBT) but not necessarily those of the finance ministry. For instance, the finance ministry had first proposed investment in equity ranging from 0-15% of the incremental income in 2008. However, CBT did not approve of this. Hence, the 2013 investment pattern that's being followed doesn't provide for any investment in equity .
However, following the recent notification by the finance ministry , Labour Minister Bandaru Dattatreya had referred the proposed investment pattern to the Finance Investment & Audit Committee, which at its meeting on March 26 concluded that "the government was competent to notify the pattern of investment and that pattern of investment was binding on EPFO".
At the 207th CBT meet on Tuesday , Central Provident Fund Commissioner KK Jalan told trustees that the Finance Investment & Audit Committee was of the view that EPFO may consider investing an initial 1% in exchange-traded funds, which replicate the index and aren't as volatile as individual stocks. "This may gradually be increased to 5% by the end of the year," he said, adding that the government was the competent authority to finalise the investment pattern as it gives several concessions to pension funds, including exemption from income tax.
The decision has been opposed by trade unions which are surprised by what they describe as an about-turn by the labour ministry and EPFO. "Investing employees' money in equities is not in the interest of workers and the country but only in the interest of markets. Hence, we are against the proposal," said AK Padmanabhan of the Centre of Indian Trade Unions.
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