MC EXCLUSIVE EPFO eyes 8.5% interest payout: Plans portfolio diversification and new fund managers

At present, the total investible corpus of EPFO is Rs 17.46 lakh crore.

• EPFO has surplus to sustain 8.25 percent interest for 2-3 years
• EPFO plans to diversify investments and hire more fund managers
• Returns may rise to 8.4-8.5 percent with new investment strategy

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The Employees' Provident Fund Organisation (EPFO) has enough surplus in its investible corpus to sustain crediting 8.25 percent interest to its subscribers’ accounts for the next 2-3 years, sources in the know told Moneycontrol.

But since the intent of the fund is to go beyond the present figure, which has remained unchanged for three years in a row, EPFO is hiring more fund managers and diversifying its investment portfolio, so that the returns can reach up to 8.4-8.5 percent going forward, the sources say.

At present, the total investible corpus of EPFO is Rs 17.46 lakh crore. Of this, about 41 percent is invested in State Development loans (SDL), 16 percent in central government securities, 16 percent in corporate bonds, and 9.5-9.9 percent in Exchange Traded Funds (ETFs), sources say.

An Exchange-Traded Fund (ETF) is a type of investment fund that holds a collection of assets, such as stocks, bonds, or commodities, and trades on stock exchanges just like an individual stock.

The EPFO has set a limit for investments in ETFs at 15 percent, but for the past many years, the percentage has not even crossed 10 percent. To ensure the 10 percent mark is crossed and returns are increased, EPFO will now hire two more fund managers from April, sources said. At present, there are only two.

"The investment committee of EPFO is looking at ways to increase returns. We are capable of giving higher interest to subscribers," SP Tiwari, President of TUCC and Member of EPFO’s Central Board of Trustees, said.

In 2025-26, two ETFS -- CPSE (Central Public Sector Enterprise ETF managed by Nippon India Mutual Fund) and Bharat 22 ( a fund launched in 2017  by the Government of India and managed by ICICI Prudential AMC) -- provided an extended internal rate of return (XIRR) of 20.5 percent and 17.5 percent to EPFO on its investments, internal documents seen by Moneycontrol showed.

These are the only ETFs approved by the EPFO’s CBT where investments are permissible.

Sources say that, from the next financial year, the attempt will be to include more ETFs, after thorough deliberations.