EPFO to invest Rs 13k cr in ETFs in FY17; unions protest move

Labour Ministry today doubled EPFO's investment limit in ETFs to 10 per cent, which will see the retirement fund body infuse about Rs 13,000 crore in stock markets this fiscal, a move that riled trade unions who have questioned the manner in which the government raised the cap.
The Labour Ministry raised the limit of investments by the Employees' Provident Fund Organisation (EPFO) in the Exchange Traded Funds (ETFs) in 2016-17 to 10 per cent of its investible deposits from 5 per cent in the last fiscal.
"We have already issued a notification raising the EPFO investment limit of ETFs to 10 per cent from the current 5 per cent of its investible deposits considering the good economic situation," Labour Minister Bandaru Dattatreya told reporters at a press conference here.

EPFO has already invested Rs 1,500 crore in ETFs in the first half of the current fiscal and will invest about Rs 11,500 crore in the remaining six months.
When asked whether Labour Ministry has sought the EPFO trustees' approval, Dattatreya said: "The issue was discussed twice in the CBT meeting. Some members had reservations against the ETF investments. It is the bounded duty of EPFO to ensure that the money is wisely invested and good returns are given to the subscribers."
Asked whether the decision needs the Central Board of Trustees (CBT) approval or not, Labour Secretary Shankar Aggarwal said: "Government (Labour Ministry) is over and above the board."

He was of the view that when the CBT is not able to take decision on a issue then the Labour Ministry is appropriate authority, as per law (EPF Act), to take a decision for the benefit of the workers.
However, trade unions slammed the Ministry for taking a "unilateral" decision without approval of the EPFO trustees and questioned the haste in which the government issued the notification without discussing it with EPFO trustees.
They have been opposing investments by EPFO in the stock markets in view of their volatile nature and had been unanimous on the issue.