The Labor Ministry of India have created a new investment pattern by providing opportunities for the Employees Provident Fund Organization (EPFO) to invest in stock markets. EPFO is the body that governs the activities and other benefits that the employees can avail after retirement. According to this new investment policy EPFO can pool the deposits of employees and invest in shares of corporates that are listed on Bombay Stock Exchange (BSE) or National Stock Exchange (NSE) which has a market capitalization at least Rs 5,000 crore as on the date of investment. Norms of the investment pattern also specifies that the retirement fund body can invest in units of mutual funds that are regulated by the Securities Exchange Board of India (SEBI) which have a minimum of 65 per cent of their investment in shares of body corporate listed either on BSE or NSE.
Earlier the EPFO had over 6 crore subscribers who invested primarily in various in state and central government securities. But due to the opposition from unionists in equity or equity-related instruments, The Central Board of Trustees (CBT), the apex decision-making body of EPFO, decided to extend their investments to stock markets on their meeting held on March 31. The Labor Ministry approved it and made a notification regarding the new investment pattern on April 23. By this policy the retirement fund body plans to invest an amount equal to Rs 5,000 crore in Exchange Traded Funds (ETFs) by the end of this fiscal year. The new investment pattern states that EPFO will invest a minimum of 5 percent during the current fiscal year and later they have decided to increase it up to 15 percent of incremental deposits in equity or equity-related schemes. Central Provident Fund Commissioner K K Jalan said that they will start their investment in exchange trade funds June onwards . They have planned to start the investments by investing 5 per cent of their incremental deposits which they expect to be about Rs 1 lakh crore in ETFs during this fiscal.