Skip to main content

BOON FOR 4.5 CRORE SUBSCRIBERS - EPFO may Give Option to Raise Equity Exposure

By
BOON FOR 4.5 CRORE SUBSCRIBERS - EPFO may Give Option to Raise Equity Exposure 
Buoyed by higher returns on investment in equities, retirement fund body EPFO is mulling giving its subscribers an option to set aside a higher proportion of their provident fund money for this asset class.The proposal, if it goes through, will fetch higher returns to 4.5 crore EPFO subscribers in the current declining interest rate regime where returns on provident fund accumulations are bound to see a downward trend, much in sync with other small saving schemes.
Currently, 15% of PF contribution is invested by EPFO in exchange-traded funds and 85% in debt instruments like government securities.This would require significant alteration in the investment pattern of EPFO notified by the finance ministry from time to time, a senior government official told ET on condition of anonymity, as the proposal is still at an initial stage.
“Giving subscribers the choice of investment for their provident fund money will make the EPFO scheme more lucrative,“ the official added. The finance ministry had in 2015 directed EPFO to invest 515% of its incremental income into equities. Following this, in the first year itself, EPFO invested 5% in ETFs and this was raised to 10% and 15% in the subsequent years.
The cumulative return on EPFO's investment in equity was 13.72% until May in the two years since it began putting money in ETFs. EPFO declared an interest payout of 8.75% in FY15, 8.8% in FY16 and 8.65% in FY17.EPFO has been raising the amount it invests in equities since 2015, when it started with 5% of the corpus. Its investment in FY16 was  Rs 14,982 crore or 10% Rs  6,577 crore, rising to  of its incremental corpus in the following year.
This year, the investment limit has been raised to 15% of the estimated Rs1.4 lakh crore incremental corpus, which translates into about Rs  20,000 crore being invested in ETFs.The investment in equity has been opposed by trade unions on the grounds that returns are not assured and in the absence of any sell-off policy, the returns remain on paper and do not bring monetary benefits to subscribers.
There has been competition between EPFO and NPS to bag highest number of subscribers. While NPS is relatively new and has a fraction of subscribers compared to EPFO, the labour ministry is ensuring that it not only improves the services of EPFO but also diversify its investments, so that the returns are higher. “This will help subscribers to stay put while no members will come into its fold,“ the official added.

The Economic Times, New Delhi, 06th October 2017

Comments

Post a Comment

Popular posts from this blog

RBI deputy governor cautions fintech platform lenders on privacy concerns during loan recovery

By
  India's digital lending infrastructure has made the loan sanctioning system online. Yet, loan recovery still needs a “feet on the street” approach, Swaminathan J, deputy governor of the Reserve Bank of India, said at a media event on Tuesday, September 2, according to news agency ANI.According to the ANI report, the deputy governor flagged that fintech operators in the digital lending segment are giving out loans to customers with poor credit profiles and later using aggressive recovery tactics.“While loan sanctioning and disbursement have become increasingly digital, effective collection and recovery still require a 'feet on the street' and empathetic approach. Many fintech platforms operate on a business model that involves extending small-value loans to customers often with poor credit profiles,” Swaminathan J said.   Fintech platforms' business models The central bank deputy governor highlighted that many fintech platforms' business models involve providing sm
Post a Comment
Read more

Credit card spending growth declines on RBI gaze, stress build-up

By
  Credit card spends have further slowed down to 16.6 per cent in the current financial year (FY25), following the Reserve Bank of India’s tightening of unsecured lending norms and rising delinquencies, and increased stress in the portfolio.Typically, during the festival season (September–December), credit card spends peak as several credit card-issuing banks offer discounts and cashbacks on e-commerce and other platforms. This is a reversal of trend in the past three financial years stretching to FY21 due to RBI’s restrictions.In the previous financial year (FY24), credit card spends rose by 27.8 per cent, but were low compared to FY23 which surged by 47.5 per cent. In FY22, the spending increased 54.1 per cent, according to data compiled by Macquarie Research.ICICI Bank recorded 4.4 per cent gross credit losses in its FY24 credit card portfolio as against 3.2 per cent year-on-year. SBI Cards’ credit losses in the segment stood at 7.4 per cent in FY24 and 6.2 per cent in FY23, the rep
Post a Comment
Read more

India can't rely on wealthy to drive growth: Ex-RBI Dy Guv Viral Acharya

By
  India can’t rely on wealthy individuals to drive growth and expect the overall economy to improve, Viral Acharya, former deputy governor of the Reserve Bank of India (RBI) said on Monday.Acharya, who is the C V Starr Professor of Economics in the Department of Finance at New York University’s Stern School of Business (NYU-Stern), said after the Covid-19 pandemic, rural consumption and investments have weakened.We can’t be pumping our growth through the rich and expect that the economy as a whole will do better,” he said while speaking at an event organised by Elara Capital here.f there has to be a trickle-down, it should have actually happened by now,” Acharya said, adding that when the rich keep getting wealthier and wealthier, they have a savings problem.   “The bank account keeps getting bigger, hence they look for financial assets to invest in. India is closed, so our money can't go outside India that easily. So, it has to chase the limited financial assets in the country and
Post a Comment
Read more