Labour ministry to call CBT meet to increase EPFO's market exposure to 15%

CBT decision on interest rate fixation is implemented only after concurrence with finance ministry

The labour ministry will soon convene a meeting of the Central Board of Trustees (CBT) to secure its nod to increase EPFO's stock market exposure to 15 per cent, from 10 per cent as of now.

"So far, we have put in 10 per cent, investing Rs 17,000 crore in exchange traded funds (ETFs). Now, we are thinking of raising it to 15 per cent. I want to talk to the Central Board of Trustees in about 10-12 days," Labour Minister Bandaru Dattatreya told PTI in an interview.

CBT is the apex body of the Employees' Provident Fund Organisation chaired by the labour minister. It is represented by members from the labour ministry on behalf of the central government, EFPO, state governments, employers and trade unions.

Dattatreya said "rate of returns have been coming high" from capital market investments and consultations are always made with trade unions, employers and state governments to increase EPFO accruals into ETFs.

In 2014-15, the labour and finance ministries had decided to put in 5-15 per cent of the employee provident fund (EPF) into equity markets -- in phases -- to monetise the huge funds accruals.

Asked about disagreement with the finance ministry on giving over 8 per cent returns to EPFO subscribers, he said ETF investment is generating smart gains, which is why "we are able to give our subscribers such returns".

"The finance ministry had advised us to go for investment in ETFs. We are doing everything in consultation with the finance ministry and it is giving good results also," he added.

For 2015-16, the finance ministry had lowered interest rate on EPF to 8.7 per cent from 8.8 per cent, approved by the CBT, only to retract from the decision in the face of stiff opposition from unions.

As a matter of rule, CBT decision on interest rate fixation is implemented only after concurrence with the finance ministry.