EPFO to invest more in govt bonds, FinMin hikes limit to 65%

Retirement fund body EPFO can now invest up to 65% of its investible deposits in government bonds, up from 50% currently, a senior official said Tuesday.

A proposal by the Labour Ministry in this regard has been approved by the Finance Ministry, which will pave the way for additional Rs 11,000 crore investment by EPFO in government bonds every year.

"There was a limit of 50% for investments in government securities. We exhausted that limit. Now, we are getting a lot of instruments (bonds), which were getting us very good returns. With this kind of bar, we were unable to invest (more) in G-Secs," Labour Secretary Shankar Aggarwal said after EPFO's trustees met in New Delhi Tuesday.

"If we are getting higher returns in G-Secs then we should be allowed to invest more in these instruments," he added.

EPFO has been allowed to invest 5% in equity. Now out of remaining 95%, it can invest up to 65% in government securities, he said.

Thus share of private and public sector bonds will go down correspondingly.

The retirement fund body is expected to receive about Rs 1.12 lakh crore in incremental deposits during this fiscal ending March 2016. The body manages a corpus of over Rs 8.5 lakh crore and has a subscriber base of more than 5 crore.