EPFO to rebuff finmin’s push for equity investment

NEW DELHI: Employees Provident Fund Organisation ( EPFO) is likely to trash the finance ministry's latest push to invest a part of its corpus in stock markets, citing “turbulence and volatility” and is instead going to bat for the time-tested parking of funds in government securities and bonds.

The stance comes after the finance ministry turned down a proposal from the EPFO's Central Board of Trustees (CBT) for giving guarantee for investmenting in stock markets. Investing in stocks, to improve returns , has been a long-pending demand, which has repeatedly been turned down by EPFO trustees , with significant representation from unions.

Financial services secretary R Gopalan had said the CBT's suggestion for guarantees would create perverse incentive and moral hazard on the part of the trustees in exercising due diligence, while judging investment choices. “CBT will continue to invest workers' money in the most prudent and judicious manner keeping the interest of workers in mind,” the agenda note for the meeting scheduled on February 15 said. The stance has been endorsed by the EPFO's finance and investment committee . Sources said the tussle is expected to intensify after the meeting of the trustees next week.

Gopalan had criticised the practice of EPFO of allowing “liberal advances and withdrawals” as something that was preventing it from making long-term investments in stock markets. In its comments on the letter that EPFO sent to the labour secretary , the organisation defended the practice of withdrawals as something that was necessary to enable the poor worker to use “his own money for certain unavoidable obligations” . Even if the practice was discontinued , settlements were done every day and for investing in the capital market , the organisation would have to convert to a mutual fund with NAV declared every day.

“It is being stressed that the trustees have to take informed decisions in the interest of the trust. When the Board of Trustees have taken an informed decision not to expose the PF corpus to vagaries of the, it is not understood why EPFO is being forced to tread the path it is not willing to undertake,” the comments read.