Poor returns force EPFO to rethink equity investments
NEW DELHI: The Employee Provident Fund Organisation (EPFO) is revisiting its decision to invest about Rs 6,000 crore in equities in the current year following meagre returns from investments made in the three months ended October.
Its return on investments from exchange-traded funds (ETFs) was just 1.52% in August-October period, said the organisation that has a corpus of Rs 6 lakh crore of retirement savings of people working in the organised sector.
“Trade unions have raised concerns on the low returns and the issue will be discussed at the finance audit and investment committee (FAIC) to be convened shortly,” central provident fund commissioner KK Jalan said on Tuesday after a meeting of its central board of trustees (CBT).
After deliberations on the EPFO’s investments in ETFs and returns earned so far, the FAIC will put up its view for consideration of CBT for further action.
Jalan, while talking to media, pointed out that equity investments cannot be assessed on short-term basis. “These are long-term investments. Hence we should not assess returns month after month,” he said.
Union leaders, however, called for a review of the strategy to invest in equities. “When even the banks can’t find people or entities to give loans, there is little hope that our fund will attract better returns. There is a need to rethink on investments in corporate credits,” said All India Trade Union Congress (AITUC) secretary DL Sachdev.
EPFO has invested Rs 2,330 crore, or about 5 per cent of its incremental income of Rs 1.2 lakh crore this year in ETF since August. In August it had chosen SBI-ETF Nifty and SBI Sensex ETF for routing its investment in stock markets.
The provident fund manager has in the last two years delivered return of 8.75 per cent for its subscribers. It has been under tremendous pressure to invest in equities, like in the case of the National Pension System (NPS), to generate higher returns for its subscribers.
On the announcement of interest rate for 2015-16, Jalan said the issue was not listed for the CBT meeting. EPFO officials said the organisation has already worked out the rate of interest for the current fiscal based on its income projections which may be put up for consideration and approval of the CBT in its next meeting on December 9.
They said rate of interest for the current fiscal can be slightly higher than the 8.75 per cent provided for last two financial years.
The CBT on Tuesday also approved a proposal to allow national e-payment gateway Pay-Gov, in addition to the State Bank of India and other nationalised banks, to accept provident fund contributions by the employers.
Jalan said the proposal to make filing of universal account number online has been approved. Through this facility, employees and employers can submit documents online.
Read full article: Economic Times
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