Home >Market >Stock-market-news >EPFO meet today to decide on exit policy for equity investments

New Delhi: The Employees Provident Fund Organisation’s (EPFO) central board of trustees (CBT) will meet in New Delhi on Thursday to decide an exit policy for its equity investments but will not take a decision on the EPF interest rate for 2017-18 at this meeting, two government officials said.

The decision of the CBT on EPFO’s exit policy will spell out how the body plans to monetise its stock exposure to benefit subscribers.

“The CBT will take up the exit policy of EPFO’s equity investments and whatever they decide, the fund managers of EPFO will follow," labour secretary M. Sathiavathy said.

Sathiavathy, however, said the board will not take up the PF interest rate issue this time and that it may be taken up sometime in January.

The EPF interest rate for this year has garnered a lot of interest after the central government slashed interest rates on several small savings schemes including government provident fund and public provident fund.

With a 8.65% pay out, EPF yields higher interest than other provident funds which are now fetching 7.8%. But with debt investment fetching lower returns, the EPFO is likely to lower its interest rate by up to 25 basis points, Mint reported on 6 July.

Some in the government believe that lowering the EPF interest rate will further bolster criticism of the government ahead of the assembly elections in Himachal Pradesh and Gujarat, the second government official mentioned above said on condition of anonymity.

CBT, headed by the labour minister, is the apex decision making body of the EPFO. It comprises representatives of the central government, state governments, employers and employees.

Currently, EPFO invests 15% of its annual accruals in exchange traded funds (ETFs) but it’s not yet clear how it plans to credit the benefits or losses to subscribers’ accounts. EPFO has invested over Rs30,000 crore via ETFs since it started investing in stocks in August 2015-16.

One of the options the labour ministry-controlled EPFO is mulling is accruing units of ETFs to subscribers’ accounts. Another option is keeping cash and equity components separately—meaning that consent to sell off ETF units is required from a subscriber withdrawing EPF savings.

The retirement fund manager is also mulling whether it can offer an option to subscribers to opt for equity exposure beyond the 15% cutoff, the second government official said.

However, the EPFO is likely to face opposition from representatives of workers unions who are on its board. “The workers whose money EPFO is managing need to know what is the benefit they are getting because of the equity investments. Unless you have an exit policy then how will you quantify the growth of your investments," said Virjesh Upadhyay, a CBT member representing employees.

He said the workers expect EPF interest rate not to go down and that any plan to invest more money than 15% will be opposed vehemently.

EPFO manages a retirement corpus of over Rs.9 trillion and has a subscriber base of over 45 million.

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