Money from EPFO invested in 'safe' funds: Govt

 The workers' money in EPFO has not been diverted to stock markets but it is invested in funds which are safe and profitable, the government said in the Rajya Sabha.

Replying to a Calling Attention Motion of Ahmed Patel (Congress), Labour and Employment Minister Bandaru Dattatreya asserted that his "paramount interest will be safeguarding of the workers' interest."

Patel's motion was on the alleged diversion of money from Employees Provident Fund (EPF) to stock market.

Describing the allegation as "totally incorrect", Dattatreya said, "There is no question of diverting funds. This government is pro-poor, pro-worker and pro-progressive... We have made (investments) in Exchange Traded Funds (ETFs) and not in share markets."

ETF is a fund which holds several assets such as stocks, commodities or bonds and most ETFs track an index like a stock index or a bond index.

With regard to the pattern of such investment (pension funds in ETFs) and in long term investments with equity participation, he said the interests are "positive and encouraging".

"This worldover pattern is giving positive returns. These funds (equity funds) are generally for 10 years or more period, so that's why this will give encouragement in a positive direction and in a profitable manner," he said.

He assured the House that the government is maintaining a "cautious approach" and is "more concerned" about the workers' money in the EPFO.

"The indications are positive and we are in the right direction," Dattatreya said.
On the quantum of investments in ETFs, he said a March 2, 2015 notification by the Finance Ministry had prescribed minimum 5 per cent of the investible deposits and maximum 15 per cent in ETFs.

Besides, the Para 52 of the EPF Scheme, 1952, mandates that the investment will be made in accordance with the notification of the central government.

Of the total amount, 75 per cent is being investment in Nifty and the remaining 25 per cent in BSE, he said.

"In Nifty there are 50 baskets and in the BSE, 30 baskets. The funds are not invested in individual shares," he added.

The total amount invested, so far, is Rs 7,468 crore and its current market value is Rs 8,024 crore, which is an interest of 7.45 per cent, the Minister said.

"Earlier only SBI was investing it, but now to increase competition, we have also allowed UTI," he added.

The Minister said EPFO's total corpus is Rs 7.5 lakh crore and of this Rs 6 lakh crore was invested in equity, government and corporate bodies till August 2015. After August 2015, only Rs 1.25 lakh crore has been invested.

Assuring about the safety of the funds, Dattatreya said: "These are social security amounts and that too workers amount. I, as head of the apex decision making body of the EPFO, Central Board of Trustees (CBT), my paramount interest will be safeguard of the workers interest."

Patel said the minister's reply was "not satisfactory" as he had not clarified on his question of "minimum guarantee".

"The minister has also not replied on T K Rangarajan's (CPI-M) question on how can they invest a worker's contribution without taking his or her consent," he added.
Patel told Deputy Chairman P J Kurien that he wants to move a resolution against the government under Rule 167 stating that the House "Strongly disapproves of" the government's move to invest EPFO money in ETFs.

To this, Kurien said: "If you want to move a resolution, you have to give a notice. Please give the notice under the concerned rule. At this point, I am not allowing you to move the resolution."

Naresh Agrawal (SP) asked whether a notice can be served orally, to which Kurien replied that a notice has to be given in writing.

After Dattatreya's reply, Tapan Kumar Sen (CPI-M) wanted the minister to clarify on whether the government has followed the recommendations of the statutory tripartite body on the investment by the EPFO in ETFs.

"You are talking about global practices, but in many countries there is an ensured guaranteed return. What about this here," he questioned.