Employees Provident Fund Organisation (EPFO), the retirement fund body, can now enlist as a member of any recognised stock exchange, paving the way for investment of the ₹5-lakh-crore corpus in the equity markets in future.

This follows a notification issued on Friday by the Department of Economic Affairs, Finance Ministry, amending the Securities Contracts (Regulations) Rule Act to enable EPFO to become a stock market member, an EPFO release said.

The move is line with the Finance Ministry’s long-standing proposal that the huge retirement corpus be invested in the stock market to get higher returns. The Securities and Exchange Board of India is also said to have suggested that EPFO funds be invested into equity-linked mutual funds to boost the capital markets.

However, trade union representatives in the Central Board of Trustees (CBT) have been strongly opposing the move, citing the volatile nature of stock markets.

“This scheme is a welfare scheme and not a trading fund. It should be risk-free. Workers’ interest has to be protected, so retirement funds should not be invested in the share markets unless the Government gives full guarantee of returns,” M Jagadiswara Rao, a CBT member and all-India secretary, Bharatiya Mazdoor Sangh, had told Business Line earlier.

Over 8 crore organised sector workers have entrusted their retirement savings to CBT, for which they are getting an interest rate of 8.75 per cent in 2013-14. In 2012-13, the retirement body received ₹77,000 crore as contributions and is estimated to have an income of ₹ 20,796.96 crore in the current financial year.

According to EPFO’s annual accounts approved recently, there is a growth rate of 16.14 per cent, 9.18 per cent and 9.48 per cent in the contribution of EPF, Employees Pension Scheme and Employees Deposit Linked Insurance scheme, respectively.

(This article was published on March 2, 2014)
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