Labour Ministry in favour of raising EPFO's investment in ETFs

The issue of increasing investments in ETFs is expected to be taken up on Friday

Labour Ministry is of the opinion that the retirement fund body Employees Provident Fund Organisation (EPFO)'s should increase investments in the stock markets through exchange-traded funds (ETFs), as the exercise has started giving returns.

"We see the possibility of it increasing, but we want to discuss it with the Central Board of Trustees (CBT). I believe the investment in ETFs should rise," Labour Minister Bandaru Dattatreya told reporters here when asked about the issue of increasing EPFO's investment in ETFs.

A meeting of EPFO apex decision making body, CBT, is scheduled for Friday, where the issue of increasing investments in ETFs is expected to be taken up.

CBT is headed by the Labour Minister.

Dattatreya, however, said the government will take the issue of investments in the stock markets "step by step" and maintain a "cautious approach". The issue will also be discussed with the CBT.

"See ETFs are performing now. The returns are now positive and so we feel we can increase the investments, but this have to be a step-by-step process," he added.

As on March 31, 2016 the amount invested was Rs 6,577 crore which gave a return of Rs 6,601 crore, up by 0.37 per cent. As on April 30, 2016 the amount invested was Rs 6,674 crore and this gave a return of Rs 6,786 crore, which is up by 1.68 per cent.

"As Chairman I will discuss it with CBT members. Last year, It was 5 per cent and it can go up to 15 per cent as per Finance Ministry investment pattern," the minister said.

An ETF trades like an individual stock in the market and is generally a basket of various securities such as shares, bonds, commodities and indices.

The EPFO had started investing in ETFs last August. It had started investing 5 per cent of its investible deposits in ETFs last financial year. Now, there is a move to increase the proportion of such investments this financial year.

"We are always looking at protecting the interests of the EPFO, if you look at the investments, we have increased investment in Centre and State government PSUs," the minister said.