EPFO invests in private bonds
It will be done on a case-by-case basis and upon approval by the Finance, Investment and Audit Committee.
Posted on 11.21.21 at 12:32 am
The central board of the Employee Provident Fund Organization (EPFO) on Saturday approved the government’s proposal to allow the pension fund body to invest up to 5 percent of its annual deposits in alternative investment funds, including infrastructure investment trusts (InvITs).
However, this will be done on a case-by-case basis and upon approval by the Finance, Investment and Audit Committee. Investments will initially be limited to public sector funds only, Labor and Employment Secretary Sunil Barthwal said after the 229th meeting of the central board of directors (CBT).
The government has said that if EPFO is to offer a high rate of return to its subscribers, it will have to follow the investment model notified by the finance ministry.
KE Raghunathan, an administrator of EPFO, said The telegraph that the BCT has decided to “lift the restrictions on investment in the bonds of private companies”. He said FIAC would look at the various risk factors and the mitigation of those risks to recommend an opportunity if there is adequate risk coverage and good return.
Under the existing notified investment model, EPFO invests between 45 and 50 percent of its additional deposits in government securities, 35 to 45 percent in debt securities, between 5 and 15 percent in equities and up to 5 percent in short-term securities. debt term instruments.
Monthly EPFO deposits vary between Rs 15,000 crore and Rs 16,000 crore. The annual figure is around Rs 1.8 lakh crore to Rs 1.9 lakh crore.
SPJIMR’s Ananth Narayan said, “We need to devote more of our long-term savings to long-term productive infrastructure investments such as the government’s ambitious National Infrastructure Pipeline. This would not only improve returns for savers, but also ensure that the country achieves sustained higher growth. “
“Currently, there are severe restrictions on where pension funds, provident funds and insurance companies – the main aggregators of very long-term savings – can invest. Over time, rather than restricting the nature of investments through prescriptive regulations, greater autonomy should be given to investment committees managed by professionals from these organizations to manage risk and return, within the framework of regulations. principled, ”he added.
Recently, the government allowed up to 5 percent investment in asset-backed, trust-structured and miscellaneous investments, including hedge funds, real estate investment trusts, and units of trusts. investment in infrastructure.
The CBT is a tripartite body involving the government, workers ‘and employers’ representatives and its decision is binding on EPFO. It is headed by the Minister of Labor.
The meeting also decided to set up four sub-committees, comprising board members from the employee and employer side as well as government representatives.
Two committees responsible for matters relating to the establishment and futuristic implementation of the Social Security Code will be headed by the Minister of State for Labor and Employment. The two remaining committees on digital capacity building and pension issues will be chaired by the Union Secretary for Labor and Employment.