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

Household debt up, but India still lags emerging-market economies: RBI

By
  Although household debt in India is rising, driven by increased borrowing from the financial sector, it remains lower than in other emerging-market economies (EMEs), the Reserve Bank of India (RBI) said in its Financial Stability Report. It added that non-housing retail loans, largely taken for consumption, accounted for 55 per cent of total household debt.As of December 2024, India’s household debt-to-gross domestic product ratio stood at 41.9 per cent. “...Non-housing retail loans, which are mostly used for consumption purposes, formed 54.9 per cent of total household debt as of March 2025 and 25.7 per cent of disposable income as of March 2024. Moreover, the share of these loans has been growing consistently over the years, and their growth has outpaced that of both housing loans and agriculture and business loans,” the RBI said in its report.Housing loans, by contrast, made up 29 per cent of household debt, and their growth has remained steady. However, disaggregated data sho...
Post a Comment
Read more

External spillovers likely to hit India's financial system: RBI report

By
  While India’s growth remains insulated from global headwinds mainly due to buoyant domestic demand, the domestic financial system could, however, be impacted by external spillovers, the Reserve Bank of India (RBI) said in its half yearly Financial Stability Report published on Monday.Furthermore, the rising global trade disputes and intensifying geopolitical hostilities could negatively impact the domestic growth outlook and reduce the demand for bank credit, which has decelerated sharply. “Moreover, it could also lead to increased risk aversion among investors and further corrections in domestic equity markets, which despite the recent correction, remain at the high end of their historical range,” the report said.It noted that there is some build-up of stress, primarily in financial markets, on account of global spillovers, which is reflected in the marginal rise in the financial system stress indicator, an indicator of the stress level in the financial system, compared to its p...
Post a Comment
Read more

Retail inflation cools to a six-year low of 2.82% in May on moderating food prices

By
  New Delhi: Retail inflation in India cooled to its lowest level in over six years in May, helped by a sharp moderation in food prices, according to provisional government data released Thursday.Consumer Price Index (CPI)-based inflation eased to 2.82% year-on-year, down from 3.16% in April and 4.8% in May last year, data from the Ministry of Statistics and Programme Implementation (MoSPI) showed. This marks the fourth consecutive month of sub-4% inflation, the longest such streak in at least five years.The data comes just days after the Reserve Bank of India’s (RBI) Monetary Policy Committee cut the repo rate by 50 basis points to 5.5%, its third straight cut and a cumulative reduction of 100 basis points since the easing cycle began in February. The move signals a possible pivot from inflation control to supporting growth.Food inflation came in at just 0.99% in May, down from 1.78% in April and a sharp decline from 8.69% a year ago.A Mint poll of 15 economists had projected CPI ...
Post a Comment
Read more