EPFO subscribers may soon get ETF fillip; CBT meeting on Saturday

CBT meeting on Saturday may take a call on reinvesting 50% of its ETF redemption proceeds in equity

To enhance its equity exposure and earn a greater income for its nearly 70 million subscribers, the Employees’ Provident Fund Organisation (EPFO) is slated to take a call on reinvesting 50 per cent of the redemption proceeds of exchange-traded funds (ETFs) back into equity.

 

The matter will be taken up in the Central Board of Trustees (CBT) meeting on Saturday.

 

The rest is to be invested in other asset classes such as government securities and debt instruments.

 

At present, all redemption proceeds are distributed as income to the subscribers.

 

The latest available data shows the amount in the investment corpus of the retirement fund body stood at Rs 21.3 trillion in FY23.

 

The apex decision-making body of the social security organisation, chaired by Union Labour Minister Mansukh Mandaviya, will also take a call on increasing the ETF redemption period from four years now to seven years over a period of six years for better yields.

 

Sources close to the developments said the investment committee (IC), which is a sub-committee under the CBT, cleared the proposal earlier this month, paving the way for the CBT to give its final nod.

 

The latest data shows investment by the body in ETFs crossed Rs 2.5 trillion by October last year.

 

The EPFO invests in equity through ETFs only and had started putting in 5 per cent of its investible corpus in it, based on the Sensex and Nifty 50, in August 2015.

 

Though the limit has been subsequently raised to 15 per cent, till March 2022, the EPFO has invested only 8.7 per cent of its total investible corpus in equity.

 

Deepak Jaiswal, president, National Front of Indian Trade Unions (NFITU) and a member of the CBT, told Business Standard a decision on this would be made keeping the interests of the subscribers in mind and the meeting would focus on other issues such as approving the centralised payments systems, which will enable subscribers to the Employees Pension Scheme to withdraw pension from any bank and any branch across India.   Focus on ELI scheme: Labour Min to EPFO 

The Labour Ministry on Tuesday asked the retirement fund body EPFO to focus on preparations for boosting IT infrastructure and capacity building to launch the Employment Linked Incentive (ELI) scheme.  

According to a ministry statement, a comprehensive review of the various attached offices and autonomous institutions of the Ministry of Labour and Employment was held on Tuesday, chaired by Labour Secretary Sumita Dawra. For the upcoming EPFO apex body Central Board of Trustees meeting on November 30, the EPFO was also directed to be ready with various important aspects to be reported to the CBT members.