The Employees’ Provident Fund Organisation (EPFO) will substantially reduce investing its incremental income in debt instruments due to paucity of corporate bonds in the market. The government had decided that EPFO will be mandated to invest a minimum of 20 per cent of its incremental corpus in debt-related instruments, against the present requirement of 35 per cent.
Labour and Employment Minister Santosh Gangwar had written to Finance Minister Arun Jaitley in October last year to reduce minimum investment limit in debt instruments following concerns raised by EPFO’s portfolio managers that it might deviate from its investment pattern. The finance ministry gave approval to the labour and employment ministry’s proposal on February 16.
“Portfolio managers during performance review meetings had expressed concern that at times there are inadequate corporate issuances (in debt and related instruments),” the EPFO had recently said. It was also discussed in EPFO’s central board of trustees meeting chaired by the Gangwar on Wednesday.
In 2017-18, the EPFO is estimated to receive Rs 1.28 trillion as contribution from employees — a sum which gets invested in various instruments according to the investment pattern notified by the labour and employment ministry in April 2015. Apart from corporate bonds and government securities, the EPFO is mandated to invest up to 5 per cent in short-term debt instruments, 5-15 per cent in equity and related instruments and up to 5 per cent in asset-backed, trust structured and other investments.K