Govt plans to raise cap on equity investments by EPFO

EPFO may be allowed to invest up to 15% in stocks, up from 5% currently

The central government plans to lift the cap on equity investments made by the Employees Provident Fund Organisation (EPFO), the main state provident fund, to 15 per cent from five per cent of assets under management, minister of state for finance Jayant Sinha said on Thursday.

Sinha told a business conference the government was aiming to stabilise domestic equity markets by allowing greater investment by pension funds, which are typically long-term investors.

The EPFO manages Rs 6,61,274 crore ($100 billion) in savings that are now mainly invested in government bonds paying a fixed rate of interest. Last week, the regulator of another, smaller, state pension fund said the government might raise its cap on equity investments on behalf of government workers to 50 per cent of assets under management.

The sums involved are small in relation to the $1.5-trillion market value of the BSE, but could grow quickly as prime minister Narendra Modi seeks to broaden India's tiny pensions net to cover more workers.