Govt parries query on EPFO role in bourses

Even after the recent passage of the pension act, there is little hope that the state-run pension fund will invest in the stock market.

At a press conference here, Labour Minister Narendra Singh Tomar on Monday evaded a question on whether the Employee’s Provident Fund was ready to invest in equities.

 “There is a process involved in the investment in EPFO funds that is strictly decided by fund managers. They decide where this money is channeled and the government acts according to that,” Tomar said.

India has over eight crore subscribers to EPFO. Their savings grow on the basis of interest rates decided by EPFO trustees who follow restrictive investment rules. The return on investment in EPFO is significantly lower than the inflation rate increase in a year. On a long-term basis, the fund’s inability to overcome inflation can cost subscribers dearly.

That is one of the reasons for people clamouring for foreign investors being allowed to manage the country’s retirement savings. 

The flip side of such a move, however, is that the stock market is subject to volatile behaviour and no fixed return can be expected.

Over 85 per cent of EPFO’s money is held in government bonds, while the rest is parked in debentures or securities issued by banks and public sector enterprises.

 Though investments in private sector debt are allowed, the norms are so strict that only 5.65 per cent of its corpus is invested in such bonds out of a permissible allocation of 10 per cent.

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