The Employees' Provident Fund Organisation's advisory committee on Thursday turned down a proposal of the finance ministry to invest up to 15 per cent of its corpus in stock markets.
The finance and investment committee of the EPFO, which met this morning, unanimously rejected the proposal for parking up to 15 per cent of its funds totalling around Rs 1,82,000 crore (Rs 1,820 billion) into shares of listed companies as also equity linked schemes of mutual funds.
The committee, sources said, was opposed to the proposal of the finance ministry in view of the volatility witnessed in the stock markets in the recent past.
The finance ministry in August last year had suggested a new investment pattern to the EPFO under which the organisation could park up to 15 per cent of its funds in the companies listed on Bombay Stock Exchange and National Stock Exchange and also the equity-linked schemes of Sebi-regulated mutual funds.
The recommendations of the finance and investment committee are usually accepted by the EPFO's Central Board of Trustees, which is headed by the labour minister, which has the final say on such matters.
The finance ministry came out with the new investment pattern in August, 2008 after EPFO allowed private players HSBC, Reliance Capital and ICICI Prudential to manage the incremental funds of EPFO in July last year.
The EPFO had also selected the country's largest public sector bank State Bank of India for the purpose.
The finance ministry wanted EPFO to invest in stock markets to increase its yield on invested funds.
When bankers in the country were offering interest rates higher than nine per cent in April last year, EPFO found it difficult to announce even 8.5 per cent returns for 2008-09.
This is not the first time that the FIC has opposed a proposal of finance ministry. In 2007, the finance ministry had proposed something similar, saying that EPFO could invest up to 10 per cent of its funds in stocks.
Considering the volatile nature of stock markets, EPFO did not invest in stock markets.
