Sebi bats for ploughing PF money into equities

The EPFO, which has more than 5 crore subscribers across the country, provides interest of 8.75% on PF deposits.

Capital markets regulator Securities and Exchange Board of India (Sebi) on Thursday expressed concern over pension money not entering the equities market.

The Union finance ministry allows up to 15 per cent of pension funds to be invested into the securities market.

However, organisations like Employees Provident Fund Organisation (EPFO) aren’t making use of the provision.

“Talking about reforms especially in the context of those who have the mandate and have the funds but who are not letting it be invested in the market, the first example and the biggest example that comes to my mind is EPFO,” said U K Sinha, chairman, Sebi.

He was delivering the keynote address at a seminar on ‘Financing for economic growth: A policy roadmap’ organised by the finance department of the Gujarat government.

“The EPFO, for example, has a size of more than Rs 700,000 crore (Rs 7,000 trillion) Their annual accrual is more than Rs 70,000 crore (Rs 700 billion).

There is a rule or an enabling provision from the ministry of finance that up to 15 per cent can be invested in the equity market, five per cent directly and 10 per cent through mutual funds.

But that debate has been going on for decades now. Unfortunately, there has been no forward movement,” Sinha said.

The EPFO, which has 50 million subscribers, provides annual interest of 8.75 per cent on provident fund deposits.

Sinha said the bulk of the EPFO corpus is into government bonds and less than one per cent are invested in bonds issued by private sector.

Sinha also said that SEBI is going to formally announce the Real Estate Investment Trusts (REITs) guidelines and Infrastructure Investment Trusts (InvITs) guidelines.

“These two guidelines, the regulations are expected during any day this week. These have been planned after lot of consultation with the industry,” Sinha said.

“We are starting, for example, with REITs to begin and also with in InvITs with an investment or size of Rs 500 crore (Rs 5 billion),” he said. 

Photograph: Vivek Prakash/Reuters