EPFO to rethink investments in ETFs on sluggish returns

Retirement fund body EPFO will rethink its move to invest Rs 6,000 crore in exchange traded funds (ETFs) this fiscal in view of concerns expressed by the trustees today over lower-than-expected returns.
The Employees Provident Fund Organisation (EPFO) invested Rs 2,322.10 crore in ETFs during August-October period on which it earned an annualised return of 1.52 per cent.
During a meeting today of EPFO's apex decision making body Central Board of Trustees (CBT) headed by Labour Minister Bandaru Dattatreya held here, the trustees particularly trade unionists raised concern over meagre returns.
"Trade unions have raised their concerns on low returns and the issue will be discussed at the Finance Audit and Investment Committee (FAIC) to be convened shortly," EPFO's Central Provident Fund Commissioner K K Jalan told reporters after the CBT meeting here.

The CBT reviewed the performance of investments in ETFs since August this year when the EPFO started investing its money in the stock markets.
After deliberations on the EPFO's investments in ETFs and returns earned so far, the FAIC will put up its view for consideration of the CBT for further action.

Jalan who is Chairman of FAIC said the meeting of the panel can be called any time. But he was not hopeful of holding the meeting before December 9 when CBT will meet again.
EPFO has paid 8.75 per cent rate of return on PF deposits for the two consecutive years in 2013-14 and 2014-15. The main purpose of the body's decision to start investments in the equity and equity related schemes was to maximise returns.

However on the lower-than-expected returns, Jalan said: "It will be inappropriate to assess return on equity on monthly basis. These are long-term investments and hence we should not assess returns month-on-month. We should see the returns in ETFs or equity in a period of not less than five years," he explained.
On the announcement of interest rate for 2015-16, Jalan said the issue was not listed for today's CBT meeting.
However, sources said: "EPFO has already worked out the rate of interest for the current fiscal based on its income projections which may be put up for consideration and approval of the CBT in next meeting on December 9."

On lower returns, All India Trade Union Congress (AITUC)
Secretary D L Sachdev said: "When even the banks can't find people or entities to give loans, there is little hope that our fund will attract better returns. There is a need to rethink on investments in corporate credits."
Meanwhile, Labour Minister Bandaru Dattatreya today also launched the digital signatures based Online Registration of Establishments (OLRE). It is part of World Bank's ease of doing business initiatives.
The online registration will be done once the applicant employer registers on the OLRE Portal. Following which, the employers will have to register their digital signature (class II or III) and follow a verification process.

This facility will not only reduce the workload of the employer, but will also reduce the paperwork for both employer as well as the EPFO.
Besides, the CBT also approved the proposal of allowing national e-payment gateway PayGov, in addition to the State Bank of India (SBI) and other nationalised banks, for collection of provident fund contributions by the employers.
Jalan said the proposal to make filing of Universal Account Number (UAN) online has been approved.
Through this facility, employees and employers can submit documents, including digital signatures, KYC info, Aadhaar and other details, online. This facility will be first run for two months and then it will be made mandatory.