Lok Sabha Question No. 217 (STARRED), answered on 2015-12-14
Subject: Investment of Funds under EPF
Ministry: LABOUR AND EMPLOYMENT
Asked by: K. MARAGATHAM, P. C. MOHAN

## GOVERNMENT OF INDIA

## MINISTRY OF LABOUR AND EMPLOYMENT

## LOK SABHA STARRED QUESTION NO. 217 TO BE ANSWERED ON 14.12.2015

## INVESTMENT OF FUNDS UNDER EPF

*217. SHRIMATI K. MARAGATHAM:

SHRI P.C. MOHAN:

Will  the  Minister  of  LABOUR  AND  EMPLOYMENT  be  pleased  to state:

- (a)whether  the  Government  proposes  to  raise  investment  limit  of pension  funds  and  also  mandate  the  Employees'  Provident  Fund Organisation (EPFO) to invest upto five per cent of its incremental corpus in exchange traded funds/stock market and if so, the details thereof;
- (b)whether  this  decision  of  the  Government  has  been  vehemently opposed  by  labour  unions  and  if  so,  the  reasons  therefor  and  the reaction of the Government thereto;
- (c)the  amount  earmarked  to  be  invested  and  the  precautions  being taken  to  secure  the  interests  of  the  employees  due  to  volatile nature of the stock market;
- (d)whether  the  dividends,  if  available  through  such  investment,  may likely to add to the accounts of beneficiaries and if so, the details thereof; and
- (e)whether the Government proposes to introduce National e-payment gateway  for  collection  of  PF  contribution  and  if  so,  the  details thereof and whether the yearly audit report of the EPFO is also to be available  to  the  employees  and  the  public  as  well  and  if  so,  the details thereof?

## ANSWER

MINISTER OF STATE (IC) FOR LABOUR AND EMPLOYMENT (SHRI BANDARU DATTATREYA)

(a) to (e): A statement is laid on the Table of the House.

*

********

STATEMENT  REFERRED  TO  IN  REPLY  TO  PARTS  (a)  TO  (e)  OF  LOK  SABHA STARRED QUESTION NO. 217 TO BE ANSWERED ON 14.12.2015 BY SHRIMATI K. MARAGATHAM  AND  SHRI  P.C.  MOHAN  REGARDING  INVESTMENT  OF  FUNDS UNDER EPF.

(a) The  Government  has,  vide  Notification  dated  2 nd March,  2015,  revised  the Investment Pattern (IP) to be followed by Non-Government Provident Funds, Superannuation Funds and Gratuity Funds. The revised IP allows, inter-alia, investment in 'Equities and Related Investments' for a minimum of 5 per cent and maximum upto 15  per  cent.  The  revised  IP  has  been  made  effective  from  1 st April,  2015.  Currently, there is no proposal to increase the said limit in 'Equities and Related Investments'.

The  Central  Board  of  Trustees  (CBT),  Employees'  Provident  Fund  (EPF)  has decided  to  invest  5  per  cent  of  its  total  investment  in  Exchange  Traded  Fund  (ETF) during this Financial Year.

- (b)      Some  of  the  trade  unions  have  opposed  the  move.  However,  the  proposal  was discussed and approved by the CBT, EPF, a tripartite body of employees', employers' and Government representatives in its meeting held on 31.03.2015.
- (c)        As  per  the  decision  of  the  CBT,  EPF,  investment  of  5  per  cent  of  its  fresh increment  will be invested in Exchange Traded Fund (Rs.5,000/- crore approximately) in this financial year.

ETF  as  an  instrument  would  be  least  affected  by  market  fluctuations.  The volatility  would  be  minimal  in  comparison  to  individual  stocks.  Employees'  Provident Fund Organisation (EPFO) is in the process of creating an Equity Income Stabilisation Reserve (EISR) for recognition of income and distribution of profit from earning on the investment made in equity and related instruments.  These measures would minimize volatility in terms of interest being paid to beneficiaries.

- (d)        The  dividend  yield  becomes  part  of  the  net  asset  value  of  the  ETF  and  is, therefore, added  to the accounts of Employees'  Provident Fund  (EPF)  of  the employees.
- (e)      No  proposal  to  introduce  National  e-payment  gateway  for  collection  of  PF contribution is under consideration at present.  Audit Report of EPFO is placed before the Parliament and, therefore, is a public document.

********