EPFO has approved public sector InvITs and bonds as investment options

EPFO has approved public sector InvITs and bonds as investment options

Reetu | Nov 20, 2021 |

EPFO has approved public sector InvITs and bonds as investment options

EPFO has approved public sector InvITs and bonds as investment options

In a key decision that would broaden the retirement fund organisation EPFO‘s investment possibilities, its trustees have approved in-principle authorisation to invest in public sector InvITs and bonds.

However, this will be done on a case-by-case basis and with the consent of the Finance Investment and Audit Committee, and investments will initially be limited to public sector money only.

The government believes that if EPFO wishes to provide a high rate of return to its subscribers year after year, it must adhere to the investment pattern announced by the finance minister.

“The board of directors has approved investments in AIFs.” “However, it would be on a case-by-case basis, and we will solely focus on government-backed alternatives that are category one funds, such as public sector InvITs,” Sunil Barthwal, labour and employment secretary, said following the 229th CBT meeting on Saturday.

The EPFO now invests 45-50 percent of its incremental deposits in government securities, 35-45 percent in debt instruments, 5-15 percent in equities, and up to 5 percent in short-term debt instruments, according to its declared investment pattern.

Recently, the government permitted up to 5% investment in asset-backed, trust-structured, and miscellaneous investments such as alternate investment funds (AIFs), real estate investment trusts (REITs), and units of infrastructure investment trusts (InvIT), allowing EPFO to broaden its investment portfolio to maximise returns.

EPFO’s central board of trustees, or CBT, is a tripartite organisation comprised of representatives from the government, employees, and employers, and its decisions are binding on EPFO. It is led by the Minister of Labour.

EPFO’s monthly deposits vary from Rs 15,000 to Rs 16,000 crore, or Rs 1.8 lakh to Rs 1.9 lakh crore in yearly deposits.

Furthermore, the CBT has approved the formation of four sub-committees, one for establishment-related issues, one for future-oriented implementation of the Social Security Code, one for digital capacity building, and one for pension-related concerns.

The first two committees will be led by Minister of State for Labour Rameswar Teli, while the remaining two will be led by the Labour Secretary.

“Furthermore, the CBT has approved the creation of centralised IT-enabled systems by C-DAC, allowing EPFO to transition to a central database in a phased way, enabling smoother operations and increased service delivery,” the labour ministry said.

“The consolidated system will make it easier to de-duplicate and integrate all PF accounts of each member.” It will eliminate the demand for account transfers when changing jobs,” it stated.

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