The Associated Chambers of Commerce and Industry (Assocham) has urged the central government to allow the Employees Provident Fund Organisation (EPFO) to invest at least 5 percent of its funds in equities. “The EPFO can also be a beneficiary of such emerging capital markets, provided it is permitted to invest a part of its corpus in index-based equity market - which is safer, reliable and remunerative,” Assocham said in a report.
EPFO, which has a corpus of about Rs.2.6 lakh crore, has been paying 8 percent interests to its subscribers, partly from its reserves, Assocham president Sajjan Jindal said.
“It hardly earns reasonable returns on its investments in government securities and bonds,” he said.
Therefore, the time has come for the Central Board of Trustees (CBT) to “honour the recommendation of the finance ministry for nearly 5 percent EPFO fund channelisation in equities”, Jindal said.
According to the industry lobby, the risk factors in such investment can be managed by sound financial tools. Fund managers can be hired to mange such investments in equity, Assocham said in the report.
“Equity markets historically have given the best returns across any asset class in the long-term. The index-based companies have huge market cap and are subjected to stringent regulatory norms,” it added.
The existing return on investments is not sufficient to meet the current expenses and therefore “alternative, prudent sources” must be explored to increase the return, the paper said.