EPFO to increase its equity exposure; move to ensure better interest rates to subscribers

Employees' Provident Fund Organisation (EPFO) will likely increase its equity exposure to 25 per cent from the current 15 per cent. The move aimed at ensuring that the EPFO subscribers get better interest rates on their contribution towards to Employees' Profident Fund. Zee Business' Anurag Shah brings this exclusive report.  

At 8.1 per cent for FY22, interest rate on the provident fund is lowest in almost four decades.  

However, in the years to come, in order to ensure that the account holders do not get lower rates, the retirement fund body is planning to increase its equity exposure to 25 per cent from the current 15 per cent, Shah said.

 EPFO's Finance Investment Committee has given its goahaed to the proposal and it is liklet to get a green signal in the meeting of the Central Board of Trustees scheduled later this month.

Currently, 15 per cent of the money collected through the EPFs is invested in equity while the remaining is invested in debt. The retirement fund body will be increasing its equity exposure in phases - from 15 to 20 per cent initially and then from 20 to 25 per cent.

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In the debt instruments, EPFO investment retrn only between 7-8 per cent, Shah said. For FY22, the interest rate on the EPF contribution was 8.1 per cent which is lowes in 40 years, he said.

Meanwhile, the returns from equity investments is around 14 per cent which will ensure that the subscribers get better interest rates.

EPFO is one of the World's largest Social Security Organisations in terms of clientele and the volume of financial transactions undertaken. At present it maintains 24.77 crore accounts (Annual Report 2019-20) pertaining to its members.