Money & Banking

EPFO: CBT to discuss investments in IL&FS

Surabhi Mumbai | Updated on February 19, 2019 Published on February 19, 2019

Plans to seek compensation from govt on losses incurred

With mounting concerns over the retirement savings invested in debt-ridden Infrastructure Leasing and Financial Services (IL&FS), the Central Board of Trustees of the Employees’ Provident Fund Organisation (EPFO) is expected to seek a status report and discuss probable solutions.

The CBT, which is the apex decision-making body of the EPFO, is slated to meet on February 21, and several members that BusinessLine spoke to said they would seek information on the funds invested in IL&FS Group, especially by exempt and private PF trusts.

“At present, there is no clarity on how much of the retirement savings have been invested in IL&FS and its group companies.

“The big challenge is how it will be recovered and made good to subscribers, as this is part of the funds of unsecured creditors,” said a person familiar with the development.

Another source said the CBT will ask the government to compensate for losses from investments to the EPFO. There is also a provision for losses to be compensated from the reserves of the fund, which may be done for private and exempt PF trusts, he added.

IL&FS has a debt of ₹ 91,000 crore, of which, ₹50,000 crore comprises bank loans, while the rest is in debentures and commercial paper.

PF trusts are estimated to hold at least ₹9,000 crore of the bonds. Of this, EPFO is understood to have a smaller exposure, while it is largely the exempt and private PF trusts that invested more.

“The rating was good, it was seen to be backed by the government and its paper was eligible under the investment guidelines. No one thought this could happen,” noted another source.

The Insurance Regulatory and Development Authority of India (IRDAI) has already asked insurers to make provisions for their exposure to IL&FS.

Recently, CITU General Secretary Tapan Sen also wrote to Labour Minister Santosh Kumar Gangwar to provide details of investment exposure of EPF funds to IL&FS bonds “to ascertain the actual situation” and deal with it in a time-bound manner. IL&FS declined to comment on the issue.

Interest rate

Meanwhile, the CBT is also set to take a call on the PF interest rate for 2018-19. The Finance, Investment and Audit Committee of the CBT is expected to meet early in the day on February 21, and finalise its recommendations. This will then be referred to the CBT, headed by Gangwar, to take a final decision.

Sources said the PF rate could be retained at the current 8.55 per cent, although there is scope for a marginal increase.

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Published on February 19, 2019
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