EPFO set for major overhaul in new year

EPFO set for major overhaul in new year

As a new year beckons, retirement fund body EPFO (Employees' Provident Fund Organisation) is set for a major overhaul in the way it manages the provident fund deposits of its over five crore subscribers.

While it went through an image makeover and took many steps to improve the quality of services it offers during circa 2014, the EPFO has lined up a number of initiatives for implementation during 2015.

EPFO could not do much about expanding its investment options to maximise the returns for providing higher interest rate to its subscribers during 2014, and fresh attempts can be made in the new year in this regard.

The proposal to invest in the equity was shelved in its trustees meet held in August as well as in December. The trustees are still not in favour of the proposal to invest in equities and Exchange Traded Funds (ETFs).

However, the trustees have recommended making the investment pattern more flexible to further increase the percentage of investment in government securities.

EPFO's much awaited portable PF account number or Universal Account Number (UAN), which was launched by Prime Minister Narendra Modi on October 16, is scheduled to become operational in the new year and is expected to bring a complete paradigm shift to the way it identifies its over five crore subscribers, who are mainly organised sector workers.

The body has been trying to improve its delivery of service through core banking type service for its subscribers and the UAN would eventually enable the EPFO to provide that kind of service to its subscribers.

However, it can prove to be a challenging task to make operational the UAN for crores of subscribers, who would first need to operationalise this identity number online and that can be tricky with a large proportion of the account holders living in interiors of the country not being tech-savvy.

The UAN will give the facility of collation of accounts, viewing of updated accounts as well as downloading the same and putting all services on one platform.

The UAN would be portable throughout the working career of members and can be used anywhere in India. Thus, workers in organised sector would not need to apply for transfer of PF account claim on changing jobs.

During 2014, the EPFO also announced an increase in the minimum wage ceiling to Rs 15,000 per month, from Rs 6,500 per month. The decision to enhance this minimum wage ceiling, for becoming a subscriber of EPFO at time of joining employment, is expected to bring 50 lakh additional formal sector workers under the ambit of this body.

As consequence of hike in the wage ceiling, the amount of maximum sum assured under its Employees' Deposit Linked Insurance Scheme has also been increased to Rs 3.6 lakh.

EPFO has also made Rs 1000 minimum monthly pension a reality which would benefit over 32 lakh pensioners, who were earlier getting lesser amounts. This scheme was earlier valid till March 31, 2015, but the EPFO has now decided to extend its entitlement beyond the current fiscal.

In another move to improve delivery, EPFO has reduced the maximum time for settlement of various claims and payment to beneficiaries under EPF, Pension and Employees' Deposit Linked Insurance scheme to 20 day from existing 30 days.

Besides, the EPFO has also decided to open its account in other public sector banks for collection of PF contributions. It has been maintaining bank accounts only in State Bank of India (SBI) so far.

EPFO's apex decision making body also decided to retain the rate of interest on PF deposits at 8.75 per cent for the current fiscal, the same as provided in the year 2013-14.

The EPFO's Central Board of Trustees also discussed the feasibility of deployment of funds in AAA rated Central/State Public Sector Undertakings and decided to set up a PSU cell within its Investment Monitoring Cell (IMC) to negotiate with primary issuers (of bonds) on behalf of all fund managers.

The trustees had also given go ahead to invest in short term (not exceeding 15 days) borrowing of funds for participation in primary auction of securities.

The decision is expected to result in EPFO being able to invest in securities giving more profitable rates.

The EPFO has also decided to constitute a panel to look into various investment options like increasing exposure to housing finance firms and private sector bonds and the recommendations of this expert committee would be keenly awaited in the new year.

The decision was taken after examining a proposal to relax norms for increasing exposure in housing finance firms and to increase limit for investment in private sector bonds from existing 10 per cent to 15 per cent of the corpus.

The trustees were of the view that there is need for of an in-depth analysis of various investment options.

The PMO had earlier suggested that EPFO should deploy 15 per cent of funds as loan for low-cost housing as it would generate a credit flow of Rs 70,000 crore.

The initiative is expected to create 3.5 lakh additional low-cost houses.
However, with a view to facilitate its subscribers to own house, the trustees have also decided to set up a separate panel, comprising two representatives each of employers and employees, to look into issue.

With a view to expand is investment options, EPFO has tweaked norms for parking its funds as fixed deposits in banks. Before relaxing norms, EPFO was investing in term deposit receipts of eight banks which meet the norm of having non-performing assets of up to 2 per cent. The body raised this NPA cap to 3 per cent.

The decision has enabled EPFO to invest in 12 more banks including Dena Bank, IDBI Bank, Indian Bank, Oriental Bank of Commerce, Punjab National Bank, State Bank of India, UCO Bank, Corporation Bank and Union Bank of India.

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