EPFO fund managers allowed more flexibility in debt investment

The government has decided to relax investment norms for the over Rs500,000 crore funds with the Employees Provident Fund Organisation (EPFO), giving the managers of the pension fund freedom to invest in debt instruments like short-term bills.

The new rules that allow fund managers to invest up to 5 per cent of total pension funds in money markets, including treasury bills, are intended to boost returns and give a fillip to domestic debt market.

The new rules, announced by the labour ministry, also proposes to give fund managers of EPFO more flexibility to invest in corporate bonds.

Fund managers will now be allowed to invest up to 55 per cent of funds in debt issued by companies, banks and state-run financial firms.

Previously, the government had allowed the fund managers to invest up to 30 per cent of funds in debt of only state-run companies.

Fund managers can also invest up to 55 per cent of the pension funds in a new category comprising government and state bonds.

Previously, managers had to deploy 25 per cent of EPFO funds in government bonds and 15 per cent in state bonds.

Earlier, fund managers handling EPFO funds were allowed to invest these funds only in government bonds and higher-rated corporate debt.

The new rules, announced after a gap of 10 years, however, have to be approved by the EPFO board before they become official.

The EPFO, which oversees pensions of over 80 million employees, including public and private sector, across India, however, has not yet considered allowing these funds to be invested in equities.

Meanwhile, the central PF commissioner  K K  Jalan who reviewed the progress of EPFO for November 2013, said there was a remarkable increase in total receipts from the covered establishments. PF collections from 3,31,000 establishments rose 7 per cent to Rs6,087 crore compared to previous month.

He said a software patch has been incorporated for facilitating levy of damages and release of interest to ensure timely levy of damages and interest payments.

The EPFO settled around 8 million claims in the current fiscal, with 1.08 million claims settled in November alone. He said 98 per cent of the total claims were settled within the mandatory time limit of 30 days while more than 93 per cent of the payments were effected through NEFT.