The EPFO expects a profit of Rs 2,850 crore from the sale of ETFs worth Rs 9,017 crore.
The Employees' Provident Fund Organisation (EPFO) will reportedly sell investments worth Rs 9,000 crore in exchange-traded funds (ETF) to cover the shortfall. In September, the EPFO board had said nearly 0.35 percent of the 8.5 percent interest rate promised for FY20 would be fulfilled by selling ETFs.
The EPFO will sell Rs 9,017 crore of ETF investments made in 2016, in 15 to 20 tranches and the earliest investments will be sold first, LiveMint reported, citing official documents.
The EPFO expects a profit of Rs 2,850 crore from the sale, the report said, adding that it will be sufficient to make up for the shortfall.
"The tentative income (profit) from the sale of ETF for the period 01.01.2016 to 31.12.2016 would be to the tune of approximately ₹2,850.63 crore. Since the market is fluctuating, this can only be taken as a tentative figure, which may increase or decrease. Therefore, substantial surplus needs to be kept to take care of any fluctuation," the EPFO documents showed, as per the report.
Out of the Rs 9,017 crore, ETF units worth Rs 7,900 crore are with SBI Mutual Fund and the rest with UTI Mutual Fund.
"The cost of acquisition of these ETF units in 2016 was almost Rs 6,166 crore, and now they can be liquidated for over Rs 9,000 crore, allowing the EPFO to pass on gains to subscribers while maintaining a surplus for next year," a member of the central board of trustees (CBT) told the newspaper.
The retirement fund's board had earlier planned on letting go of some of their exposure to ETFs in March, but it could not be done due to the plunge in the equity market.
Dismissing reports that the EPFO will fail to pay interest at the rate of 8.5 percent to its subscribers in March, the body had said it had enough funds.Currently, the EPFO invests 85 percent in fixed income instruments and 15 percent in equity through ETFs.