In a key decision, the central board of trustees of the Employees’ Provident Fund Organisation (EPFO), in its 236th meeting chaired by labour minister Mansukh Mandaviya on Saturday, approved reinvesting 50% of its redemption proceeds from exchange traded funds (ETFs) back into equities.
The board also recommended to the Union government a national EPFO amnesty scheme 2024 for all types of employers to voluntarily declare non-compliance and non-payment of provident fund dues with zero penalties and legal proceedings, a member said.
The new investment pattern is expected to earn better returns for the state-backed retirement fund manager’s investments, which are used to decide the interest rate for retirement savings of nearly 70 million employees in the formal sector. The interest rate is a widely watched metric.
This was the 42-member board’s first meeting in the current fiscal year. In the last meeting of the board, the top decision-making body of the EPFO, held in February, it approved an interest rate of 8.25% for FY24.
According to official data, total investments by the retirement fund body into the ETFs crossed ₹2.3 lakh crore by March 2024, which is 9.49% of its total investible corpus.
{{/usCountry}}According to official data, total investments by the retirement fund body into the ETFs crossed ₹2.3 lakh crore by March 2024, which is 9.49% of its total investible corpus.
{{/usCountry}}An exchange-traded fund is a pooled investment instrument that can be bought and sold like an individual stock.
Provident funds provide retirement income for nearly all of salaried Indians in the formal sector. It often is the key corpus of lifetime savings for the working people.
The Covid pandemic had pressured the EPFO’s earnings. Throughout 2022-23, an almost globally synchronised increase in lending rates by central banks, which has an inverse relationship with bond returns, tightened investment earnings for the EPFO. The EPFO is mandated to invest in stock markets, especially exchange-traded funds.