EPFO may increase equity investment limit to 25%

14 Jun 2022 , 09:05 AM

At its forthcoming board meeting next month, the Employees’ Provident Fund Organisation (EPFO) is expected to explore increasing its equity investment limit from 15% to 25%, according to persons familiar with the situation.

They said that the board might address administrative concerns as well as continue debates and finalize the recommendations of the EPFO’s four subcommittees.

These four EPFO sub-committees are responsible for the EPFO’s establishment, future-oriented execution of the Social Security Code, digital capacity building, and pension-related concerns.

The EPFO’s central board of trustees (CBT) will meet for the 231st time on July 8 and 9 in Bengaluru, according to the retirement fund authority.

The CBT is led by the labor minister and includes members from businesses, employees, and the federal and state governments. The EPFO has not yet made the meeting’s agenda public.

At its meeting, last month, the Finance Investment and Audit Committee (FIAC), a sub-committee of the CBT, proposed hiking the equity investment cap in two equal increments of 5% each to provide greater returns for EPF participants.

The sharp fall in the interest rate on PF deposits to 8.1 percent for 2021-22 from 8.5 percent the previous fiscal year sparked this.

“At the most recent FIAC meeting, many opportunities and choices, including the potential of raising the investment barrier in shares, were considered. However, no judgment has been made yet since we need more information,” said KE Raghunathan, a member of both the FIAC and the CBT.

“A day before the CBT next month, the committee will convene to discuss the topic further.” Due to the lack of a government-backed guarantee on such investments, the proposal to boost equity investments may attract severe opposition from labor unions.

It would also necessitate the finance ministry changing its investment strategy, which now permits the EPFO to invest up to 15% of its additional revenue in the stock market.