Maximising returns: EPFO to invest in InVITs sponsored by govt bodies

The Central Board of Trustees (CBT), the highest decision-making body of the Employees’ Provident Fund Organisation (EPFO), on Saturday decided to use all approved investments, including Infrastructure Investment Trusts (InvIT) bonds sponsored by government organisations like NHAI, in order to enhance returns.

As per the notified investment pattern, EPFO can invest its incremental deposits –amounting to around Rs 1.8 lakh crore a year at present – as follows: 45%-50% in government securities, 35-45% in debt instruments, up to 5% in short-term debt instruments, between 5 and 15% in equities and up to 5% in asset-backed, trust-structured and miscellaneous investments.

The asset-backed, trust-structured and miscellaneous investment category was modified in April this year to make way for investment in units issued by category I and category II Alternative Investment Funds (AIF) regulated by the Securities and Exchange Board of India (SEBI). However, EPFO has not exercised these options so far.

“All the new instruments (where EPFO has not invested so far) in the government sector will be explored on case-to-case basis,” labour minister Bhupender Yadav, who is also the chairman of the CBT, told reporters after the CBT meeting. This would mean that EPFO may now invest in InVITs sponsored by government-sector entities, but won’t tap InvITs sponsored by private sector entities at least for now.

The CBT has also decided to empower the Finance Investment & Audit Committee (FIAC), a sub-committee under it, to decide upon the investment options, on case-to-case basis, for investment in all such asset classes which are included in the pattern of investment as notified by central government, an official statement, released after the meeting of the CBT, said.

Labour secretary Sunil Barthwal said, “If we have to give high rate of interest, then we have to follow the investment pattern notified by the finance ministry. There are certain instruments where we could not invest earlier because of certain reasons. In those instruments also, we will be able to invest now.”

He added: “We will be going ahead with the open mind. We will have to see yield maximisation while at the same time, we will have to keep in mind the security if funds. We are just trustee of the money parked by the workers. We have to take utmost attention to secure their money.”

The finance ministry has recently approved 8.5% return on employees’ provident fund (EPF) deposits for 2020-21, a move that will impact over 6.4 crore subscribers. The rate was the same for 2019-20. At 8.5%, EPFO will have to fork out around Rs 70,000 crore as interest to its subscribers for 2020-21. The retirement fund body will still have Rs 1,000 crore as surplus.