Big decision by Modi Govt! EPFO, PF trust may generate more money for you now | Benefit EXPLAINED here

In a significant move, the Modi Government has allowed Employees' Provident Fund Organisation (EPFO) and Exempted Provident Fund Trusts to invest in public sector debt ETFs (Exchange Traded Funds) like Bharat Bond ETF. As per the media reports, the central government issued a notification in this regard on 4th January 2020.

To date, four tranches of Bharat Bond ETFs have been launched so far — two in  2019 and two in 2020. Edelweiss Asset Management manages the Bharat Bond ETFs, which are allowed to invest in AAA PSU debt and have set expiry dates in 2023, 2025, 2030 and 2031. They have a collective size of around Rs 30,000 crore.

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Despite an 8.5 per cent interest rate declared by the EPFO for FY20, these ETFs have yields in the 4.5 per cent to 6.6 percent range and have exempted PF trusts also to match. As a solution to this mismatch, experts suggested a transfer of risk to subscribers rather than provident funds through unitisation.

Hailing the Modi Government's move SEBI registered tax and investment expert Jitendra Solanki said, "This move will help center to reduce the burden of paying a guaranteed return to the EPFO subscribers. The move is expected to help the government generate higher returns by the EPFO and exempted PF trusts in the coming time. Currently, they have just broken the ice by moving from assured guaranteed return to a variable return."