Skip to main content

EPFO may Allow Tweak in Equity Investments

By
EPFO may Allow Tweak in Equity Investments 
Labour min likely to introduce proposal to hike contribution limit of 15%, risk-averse subscribers may be allowed to cut exposure
Employees’ Provident Fund Organisation (EPFO) subscribers may soon get the option to invest more of their retirement contribution in stocks to potentially earn higher returns, a senior labour ministry official said. The labour ministry is likely to introduce a proposal to increase the stipulated equity investment limit of 15% at the next central board of trustees (CBT) meeting on June 26. Any change in the norm will require the finance ministry to notify the new investment pattern. The EPFO has more than 50 million subscribers. The National Pension System (NPS) under the finance ministry gives subscribers the choice of investing as much as 75% in stocks.
At the same time, risk-averse EPFO subscribers may also get the option to reduce their equity contribution under the plans being considered, said the official. To be sure, raising the investment limit could see more funds going into Indian stocks, bolstering them at a time when they have been rattled by looming trade wars. CBT is the highest decisionmaking body of the EPFO and is chaired by the labour minister, currently Santosh Gangwar. It comprises representatives of trade unions, employers and central and state governments. The official told ET that the agenda for 222nd CBT meeting was still being finalised but the equity plan may be discussed.
“Considering that we have a unitisation policy for equity investments in place, which will be operational soon, we are now planning to move a step forward and give choice to our subscribers to either increase or decrease the investments in equity beyond the existing 15%,” the official said. CBT last year approved an accounting policy to credit units in lieu of investments in equities via exchange-traded funds (ETFs) into members’ accounts. Each EPF subscriber would then have two member account heads— fixed income and equity— with holdings reflected as units and returns being marked to market. It had also approved the recommendation of EPFO’s advisory body—the Finance Investment and Audit Committee—that subscribers be allocated equity units only for 15% of contributions. All units over and above this allocation to subscribers will be held by EPFO.
EPFO started investing in ETFs in August 2015. This amounted to 5% of investible deposits in FY16, rising to 10% in FY17 and 15% in FY18. It had invested Rs.41,967.51 crore in ETFs with a return of 17.23% as of February 2018. It had sold ETFs worth Rs.2,500 crore in March.
The Economic Times, New Delhi, 20th June 2018

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