The EPFO has cumulatively invested Rs 1.7 lakh crore in equities, out of which over Rs 22,000 crore have been redeemed till March 31, 2022
The Employees’ Provident Fund Organisation (EPFO) is likely to take a decision on offloading equity in August, instead of earlier plan to do so in February. It will help the retirement fund body plan liquidation of its equity investments better, according to a media report.
The EPFO as of now takes decision to offload equity in February, which leaves the organisation with less than a month to realise the capital gains on the basis of which, it declared the rate of interest on PF deposits for the concluding year, the ET report said quoting a senior government official.
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“However, from this year onwards, we will take a decision sometime in August, so that actual offloading can happen over the next six to seven months depending on the stock market conditions,” the report said.
EPFO follows the ‘first in, first out’ principle while offloading equity. In this principle, investments made in equity in the first year are offloaded in the fourth year. It helps the money remains invested for a longer duration and gets better returns.
The Employees’ Provident Fund Organisation started putting in money into equities in 2015-16. It started with 5 per cent in the first year, 10 per cent in the second year and 15 per cent in the subsequent years. The EPFO has cumulatively invested Rs 1.7 lakh crore, out of which over Rs 22,000 crore have been redeemed till March 31, 2022.
According to reports, the EPFO is currently considering a proposal to raise the equity investment limit to 25 per cent, from the existing 15 per cent. Its Finance Investment and Audit Committee has also met to discuss the matter. According to the reports, if the equity investment limit rises to 25 per cent, the EPFO may pump invest Rs 3,000 crore in the stock market every month.
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The proposal envisages raising the equity exposure to 25 per cent in two phases — to 20 per cent in first phase and 25 per cent in second, according to the reports. The plan is likely to be discussed in the EPFO Central Board of Trustees’ (CBT) meeting in the last week of this month. After the finalisation of the proposal at the EPFO, it will be sent to the finance ministry and labour ministry for their approvals.
Last month, the government approved an 8.1 per cent rate of interest on employees’ provident fund (EPF) deposits for 2021-22 — an over four-decade low — for about five crore subscribers of retirement fund body EPFO. Earlier in March this year, the EPFO had decided to lower the interest on provident fund deposits for 2021-22 to 8.1 per cent from 8.5 per cent provided in 2020-21.
The 8.1 per cent EPF rate of interest is the lowest since 1977-78, when it stood at 8 per cent. The 8.5 per cent interest rate on EPF deposits for 2020-21 was decided by the Central Board of Trustees (CBT) in March 2021.
