Markets to get a Rs6,000-cr boost from EPF money this fiscal: minister

28 Jul 2015

An estimated investment of Rs6,000 crore in equities by the Employees' Provident Fund Organisations (EPFO) during the financial year ending 31 March 2016 should come as a big boost to stock markets peeved by regulatory concerns over foreign fund flows.

Union minister of state for labour Bandaru Dattatreya today said the EPF investments in equities have already commenced and should reach the Rs6,000-crore figure by March 2016.

"We proposed to go for equity participation with this Rs6,000 crore by end of March 2016. This process has already begun. Our portfolio managers, SBI, Reliance and HSBC bank and some other organisations are part of this portfolio management. Through them, we have facilitated the entry of these funds into the market. This is being done for the first time by the labour ministry," he told reporters in Hyderabad.

The investment would begin with 1 per cent of EPF-related money, which could eventually go up to 15 per cent, he said.

"Approximately Rs8,30,000 crore of EPF-related money is there (with the government). The finance minister had said in his budget speech that portfolio management (of the funds) should not be done by old methods alone and favoured equity participation of 5 to 15 per cent," Dattatreya pointed out.

The minister said the decision has been taken after consultations with workers' representatives and proper studies undertaken by a major consultancy, which noted that workers in other countries got higher returns through equity participation of their funds.

"They (consultancy) gave a report to this effect. We made a presentation on this before the Central Board of Trustees (of EPF). We gave a presentation to all trade union leaders, entrepreneurs, state government representatives and officials in our Ministry.

"We took a decision in consultation with our officials to make equity participation of Rs6,000 crore in the first phase. One per cent (of the corpus) to begin with, then two per cent, three per cent, four per cent and finally five per cent."

On the possible losses to EPF investors due to the volatility in equity markets, which are known to guarantee no assured returns, he said these investments are being made for a long haul.

"These are long-term investments. These are not investments for one year or two years. They give more returns. Our investments are for 10 years or 15 years. Though it may appear to be causing losses in the short term, in long term, it would be giving profits. We are giving (interest of) 8.75 per cent now. It (equity investment) is likely to fetch more than 10 per cent," Dattatreya said.

The Employees' Provident Fund Organisation (EPFO) has more than 50 million subscribers across the country with total subscriptions crossing Rs8,30,000 crore.