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Business News/ Money / Personal Finance/  EPFO, PFs can now invest in Bharat Bond ETFs: Centre
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EPFO, PFs can now invest in Bharat Bond ETFs: Centre

Four tranches of Bharat Bond ETFs have been launched so far, two in December 2019 and two in mid-2020
  • The ETFs have yields in the 4.5%-6.6% range, well short of the 8.5% interest rate declared by the EPFO for FY20
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    In a notification dated 4th Jan, the Government allowed the EPFO and exempted provident fund (PF) trusts to invest money in units of public sector debt ETFs such as the Bharat Bond ETFs.

    Four tranches of Bharat Bond ETFs have been launched so far, two in December 2019 and two in mid-2020. Edelweiss Asset Management manages the ETFs which are allowed to invest in AAA PSU debt and have set expiry dates in 2023, 2025, 2030 and 2031. They have a collective size of around 30,000 crore. "I expect flows to come in monthly, rather than a single point of time. They will hence be manageable and won't present a supply problem," said Radhika Gupta MD and CEO Edelweiss Asset Management Limited.

    However, the ETFs have yields in the 4.5%-6.6% range, well short of the 8.5% interest rate declared by the EPFO for FY20, which exempted PF trusts also have to match. Experts have called for a transfer of risk to subscribers rather than provident funds through unitization as a solution to this mismatch.

    "This is a good move but ideally EPFO and PF trusts should be allowed to credit these units to employee accounts and allow employees to take decisions on them. Without unitization, this move will have limited impact on the operations and returns of provident funds," said Amit Gopal, India Business Leader, Investments, Mercer.

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    ABOUT THE AUTHOR
    Neil Borate
    I head the personal finance team at Mint. I have been writing about personal finance for the past 8 years after finishing two degrees in law and economics respectively. I do what I do, to help the ordinary Indian saver and investor.
    Catch all the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
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    Published: 06 Jan 2021, 08:12 PM IST
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