Labour Min may notify new investment norms for EPFO soon

The Labour Ministry may soon notify new investment norms for EPFO allowing the retirement fund body to invest up to 5% of its huge corpus of Rs 6.5 lakh crore in exchange traded funds (ETF).

The new pattern of investment may allow investment of about Rs 17,000 crore in ETFs during 2015-16.

"The proposal of new investment pattern for the EPFO, which allows the body to invest up to 5% of its corpus in ETFs is under consideration of the Labour Ministry," a source said.

"The new investment norms will pave the way for up to Rs 17,000 crore investment in ETFs during this fiscal only," the source said.

The Employees' Provident Fund Organisation (EPFO), which has over 6 crore subscribers, invests primarily in state and central government securities.

An ETF is a marketable security that tracks an index, a commodity, bonds, or a basket of assets like an index fund. Unlike mutual funds, an ETF trades like a common stock on a stock exchange.

Unionists had opposed any investment in equity or equity related instruments during the meeting of Central Board of Trustees' -- EPFO's apex decision making body -- on March 31.

However, after the meeting, a Labour Ministry official had said: "We will notify the investment pattern soon. Over a period of time, it makes sense to invest in equity. Investment in a basket of portfolio is safe. All over the world, experience is that equity investment has given the highest returns."

"What we are thinking is that we will start with 1% and will go up to 5%. We will review and gradually increase the investment limit," the official had said.

EPFO is expected to receive an incremental deposit of about Rs 80,000 crore for 2014-15. It manages a huge corpus of Rs 6.5 lakh crore.

The Finance Ministry has been pitching to park a part of EPFO corpus in the stock market.

It has recently notified an investment pattern for non-government provident funds to enable them to park a part of their funds in stock market.

The new norms prescribe "investment of minimum 5% and up to 15% of the investible funds in equity and equity-related instruments.