MC EXCLUSIVE Aiming for higher returns: EPFO to form panel with RBI, FinMin to overhaul equity, debt investments

At present, the EPFO has a total corpus of about Rs 25-26 lakh crore.

Aimed at generating higher returns over its investments, the Employees’ Provident Fund Organisation (EPFO) is going to form a high-level committee soon, which will include officials from the finance ministry and the Reserve Bank of India (RBI), to restructure its equity and debt portfolios.

Two government officials told Moneycontrol that the EPFO will form the committee to examine a series of recommendations made by the RBI to improve its holdings in financial instruments in order to generate higher returns.

"The committee will give its suggestions by December to the EPFO, post which a call will be taken by the Fund’s Central Board of Trustees (CBT) on restructuring," one person said.

At present, the EPFO has a total corpus of about Rs 25-26 lakh crore, which it has invested into equity and debt instruments. About 41 percent of the corpus is invested in State Development Loans (SDL), 16 percent in central government securities, 15.9 percent in corporate bonds, and 9.5 percent in Exchange Traded Funds (ETFs), as per sources.

"The aim is to re-look at the portfolio, and increase the share of equity in total holdings," the second official said. "Even within debt, instruments that yield higher returns would be targeted going forward." In 2023-24, the portfolio of EPFO generated a yield of 7.62 percent.

"If higher returns are generated, EPFO will be able to credit more interest to its subscribers' accounts every year. We aim to examine the RBI’s suggestions," SP Tiwari, President of TUCC, and Member EPFO’s CBT, told Moneycontrol. In 2024-25, the interest notified was 8.25 percent, similar to the rate notified in 2023-24.

Sources say the RBI has suggested EPFO to manage its equity portfolio more pragmatically and deploy a different investment mechanism for its three different schemes to maximise returns. The three schemes of EPFO are: Employees' Provident Funds Scheme, Employees' Pension Scheme, and Employees' Deposit Linked Insurance Scheme.

The total corpus of EPF is around Rs 15.5 lakh crore, the Pension fund is over 9 lakh crores, and the EDLI is over Rs 50,000 crore. "If EPFO generates higher yields, it would be able to credit interest of more than 9 percent every year to subscribers’ accounts," the first person said.