EPFO drops stock market investment plans

The Employees Provident Fund Organisation (EPFO) yesterday decided against investing in the stock market in view of the finance ministry's refusal to provide any guarantee on returns and safety of such investments. Further it stuck to its decision on payment of 9.5 per cent interest rate on the provident fund deposits for 2010-11, a move which would benefit around 4.71 crore employees.

''We don't want to invest in equities. No further decision has been taken on this and the same status (of not investing PF money in the stock market) would prevail. We did not get any guarantee from the finance ministry on such investments in the stock market,'' said labour and employment minister, Mallikarjun Kharge after a two hour long meeting of the Central Board Of Trustees, the top-decision making body of the EPFO.

The finance ministry, refusing to offer any guarantee said ''there is no question of government providing the sovereign guarantee to any provident fund.'' Analysts say, with its Rs500,000 crore of funds, the EPFO could have given a big boost to the stock market.

Kharge said, as far as 9.5 per cent interest (2010-11) was concerned, the finance ministry had sought some clarification. He added the clarifications had been sent by the labour secretary to the finance ministry.

He said he hoped, that after they had answered all clarifications, they (finance ministry) would approve it (9.5 per cent interest rate for 2010-11. Since 2005-06, the EPFO has been offering 8.5 per cent interest on deposits.

However, this year it raised the interest rate by 1 per cent after an accounting review disclosed a surplus of Rs 1,731.6 crore in its interest suspense account. This has, however, been rejected by the finance ministry on doubts  about the surplus funds. It had then ordered a special audit.