The Hindu Business Line : EPFO set to make changes in investment norms

WITH the opening up of the provident fund sector to private players, the largest PF organisation in the country, the Employees Provident Fund Organisation (EPFO), is all set to bring in major changes in its investment guidelines.

The Central Board of Trustees of the EPFO will meet on Monday to consider changes in the fund's investment pattern based on recommendations made by EPFO's portfolio manager, State Bank of India.

The recommendations made by SBI have already been internally assessed by the EPFO and the organisation has proposed certain changes. These changes need to be endorsed by the CBT before implementation.

While currently, the EPFO is permitted to invest in bonds of PSUs, it is now proposed that keeping in view the track record and huge demand for funds of PSUs like the FCI, NTPC, NHPC, NHAI, etc., SBI could be asked to scout for direct investments in these organisations and the Central Provident Fund Commissioner may facilitate SBI's effort by making a reference to the chief executive officers of these PSUs.

To avoid idling of funds lying with the EPFO for short periods ranging from one week to three weeks, the organisation will now be unshackled and allowed to participate in the repo market.

While till now SBI had the mandate to give preference to low-yielding Central Government securities over State Development Loans (SDLs), it may be reversed and SBI may give preference to SDLs over Central securities.

According to the present guidelines, SBI being the portfolio manager, it was not permitted to transact with itself or any of the SBI's associate banks. This condition is now being waived.

While existing rules allow exposure only to PSUs set up directly by the Central or State Governments like the Life Insurance Corporation or Punjab National Bank , it is now proposed that the fund will be allowed to invest in their subsidiaries also, like the LIC Housing or PNB Housing.

As of now, exposure to any public sector undertaking or financial institution is restricted to 25 per cent of the net worth of the organisation. In case of public sector banks, the limit will be raised to 30 per cent of the bank's net worth.

Also, the maturity period of bonds in which the EPFO can invest is being increased. As of now, investment is allowed only in securities having a maturity period of up to five years. This is proposed to be raised to 10 years now.