EPFO mulls raising equity investment limit to 25% to bridge shortfall in returns

Mumbai: The Employees’ Provident Fund Organisation (EPFO) is likely to discuss raising its equity investment limit from 15% to 25% at its upcoming board meeting next month, said people aware of the matter.

The board could also take up administrative issues and hold further deliberations and finalisation of the recommendations of the four sub-committees formed under the EPFO, they said.

These four sub-committees pertain to establishment related matters, futuristic implementation of the Social Security Code, building up digital capacities and pension related issues of the EPFO.

“The 231st meeting of the central board of trustees (CBT) of EPFO will be held on July 8 and 9 in Bengaluru,” the retirement fund body announced.

The CBT comprises representatives of employers, employees and central as well as state government and is headed by the labour minister. The EPFO has not yet made the agenda of the meeting public.

The Finance Investment and Audit Committee (FIAC), a sub-committee of the CBT, at its meeting last month discussed raising the investment ceiling in equities in two equal phases of 5% each to ensure higher returns for EPF members.

This was triggered by the steep reduction in interest rate on PF deposits to 8.1% for 2021-22 from 8.5% for the preceding fiscal.

“Various opportunities and options, including the possibility of increasing the threshold of investment in equities, were discussed in the last FIAC meeting. However, no decision has been firmed up yet as we have sought more clarity on the matter,” said KE Raghunathan, a member of both FIAC and CBT.

“The committee will meet a day before the CBT next month to further deliberate on the matter.”

The proposal to raise equity investments could face stiff resistance from trade unions since there is no government backed guarantee on such investments.

Further, it would require the finance ministry to alter its investment pattern which allows the EPFO to invest up to 15% of its incremental income in the equity market.